Different Types of Life Insurance Policies in India

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3 min
02-September-2024

Life is unpredictable, but planning ahead can provide peace of mind. Life insurance ensures that your loved ones are financially secure even if something happens to you. It helps cover daily expenses, outstanding debts, education costs, and future financial goals. With the right policy, you can protect your family from financial hardships, offering them stability and support in difficult times. Investing in life insurance today guarantees a secure future for those who depend on you.

What is a life insurance policy?

Life insurance provides financial security to the beneficiary after the insured person dies. In addition, life insurance also ensures that the family of the insured does not face any financial difficulties in case of an unexpected demise. It acts as a safety net for loved ones, covering living expenses, debts, and future financial needs. There are various types of life insurance available, each designed to cater to different financial goals.

One size does not fit all! Discover the types of life insurance that match your needs—protection, savings, or investment. Check plans to choose wisely! Understanding these different types of life insurance policies in India can help you choose the right coverage to secure your family's financial future.

Understanding the two main types of life insurance policies: Term and whole life insurance

The two main types of life insurance are term life insurance and whole life insurance.

  • Term life insurance: Term life insurance gives coverage for a set time, like 10, 20, or 30 years. It pays a death cover if the insured person dies during that time. Term insurance come with lower premiums compared to whole life insurance. There is no cash value component in this type of life insurance policy.
  • Whole life insurance: Provides lifetime coverage with a guaranteed death benefit. Whole life insurance includes a savings component that accumulates cash value over time. These life insurance policies come with higher premiums than term life insurance. Whole life insurance also offers policy loans and withdrawals.

Explore the different types of life insurance policies in India

Given below are the different types of life insurance policies:

Types of life insurance

Description

Term insurance

Temporary coverage, pays death benefit, affordable premiums.

Term insurance with return of premium

Returns premiums if insured survives the term period.

Unit Linked Insurance Plan (ULIP)

Combines insurance and investment, market-linked returns.

Endowment plans

Savings and protection, pays lump sum on maturity.

Moneyback policy

Periodic payouts during the policy term, guaranteed returns.

Whole life insurance

Lifetime coverage, cash value accumulation, higher premiums.

Group life insurance

Coverage for a group, typically offered by employers.

Child insurance plans

Financial security for child's future, education, and needs.

Retirement plans

Provides regular income post-retirement, ensures financial security.


Read about the different types of life insurance policies in India in depth here:

1. Term insurance

  • Term insurance provides coverage for a specified term, for example, 10, 20, or 30 years.
  • Purely provides a death benefit to beneficiaries if the insured passes away during the policy term.
  • Generally, more affordable than other types of life insurance policy.
  • No cash value or savings component.
  • Ideal for individuals seeking temporary coverage to protect against financial risks during specific periods.

Explore: Term insurance calculator

2. Term Insurance with return of premium (TROP)

  • Premiums are returned to the policyholder if they survive the policy term.
  • Combines death benefit with savings.
  • Higher premium compared to regular term insurance due to the return of premium feature.
  • Appeals to individuals who want some form of savings but still prioritise the simplicity of term insurance.

Read more: Return on premium option in term insurance

3. Unit Linked Insurance Plan (ULIP)

  • Unit Linked Insurance Plan (ULIP) is a hybrid product combining life insurance with investment options.
  • Policyholders can allocate premiums to various investment funds (equity, debt, etc.).
  • Returns depend on the performance of chosen funds.
  • Offers potential for higher returns but also carries investment risks.
  • Provides flexibility to switch between funds and partial withdrawals.

4. Endowment plans

  • Endowment insurance plans are a mix of life insurance and savings component.
  • Offers a guaranteed payout on the maturity date or upon the insured's death, whichever comes first.
  • Suitable for individuals seeking moderate savings and insurance.
  • Generally, has higher premiums compared to term insurance.
  • Appeals to risk-averse individuals looking for a guaranteed pay out.

5. Moneyback policy

  • Money-back policy provides periodic payouts (survival benefits) during the policy term.
  • Combines insurance coverage with periodic returns.
  • Ensures liquidity at various stages of life for policyholders.
  • Suitable for individuals who want to receive money at specific intervals without waiting for policy maturity.

6. Whole life insurance

  • Offers coverage for the entire lifetime of the insured.
  • Whole life insurance includes a savings or investment component with a cash value that grows over time.
  • Premiums are higher than term insurance due to the lifelong coverage and cash value.
  • Policyholders can borrow against the cash value or surrender the policy for a payout.

7. Group life insurance

  • Provided by employers or organisations to a group of members, such as employees.
  • Group life insurance offers a single policy covering multiple individuals.
  • Premiums are typically lower than individual policies.
  • Generally, includes basic life coverage; optional add-ons may be available.
  • Coverage might cease if the insured leaves the group.

8. Child insurance plans

  • Child insurance plans are designed to secure a child's future financially.
  • Provides a lump sum amount upon the parent's death or after the child attains a certain age.
  • Helps in funding education, marriage, or other significant life events.
  • Combines insurance with a savings component.

9. Retirement plans

  • Also known as pension plans or annuities.
  • Provides financial security during retirement.
  • Accumulate funds through regular premiums or lump sum payments.
  • Offers periodic payouts (annuity) after retirement.
  • Ensures a steady income stream in the post-employment phase.

From term plans to whole life cover, explore the types of life Insurance that secure your future. Find your perfect plan today! Check plans and premiums!

In conclusion, life insurance is an essential financial product that provides financial security to the policy beneficiary. There are different types of life insurance policies each with its own features and benefits. It is important to evaluate your financial situation and goals to determine which type of life insurance policy is best for you.

Regardless of the type of policy you choose, having life insurance provides peace of mind and protects your loved ones in case something unexpected happens.

Steps to buy life insurance policy through Bajaj Finance Insurance Mall

You can follow the steps below to buy a life insurance policy through Bajaj Finance:

Step 1: Click on ‘Get Quote’ to open our online application form.

Step 2: Enter the required details – name, mobile number, email ID, DOB, and gender. Click on ‘Proceed’ button.

Step 3: Share a few more details related to your lifestyle, occupation, education, income and PIN code. Click on ‘View Plans’ button.

Step 4: You will see the plans available. Click on ‘Buy Now’ on the plan and our representative will call you back and explain the products available for you to take an informed decision.

Key features of life insurance policy: Everything you need to know

Life insurance is a critical financial tool that provides security and peace of mind and there are different types of life insurance as mentioned above. Here's a concise overview of the fundamental features, focusing on different types of life insurance:

  • Premiums: Regular payments to maintain the policy.
  • Death benefit: The sum paid to beneficiaries upon the insured's death.
  • Cash value: Accumulates over time in permanent policies.
  • Policy term: Duration of coverage in term life insurance.
  • Riders: Additional features like critical illness or disability options.

Understanding these features empowers individuals to choose a life insurance policy aligned with their financial goals and needs, providing a safeguard for the future.

Read more: Savings plan

Why is a life insurance policy is essential for financial security?

The importance of life insurance is inevitable. Especially considering the various financial responsibilities individuals have in their lives.
Here are a few reasons why a life insurance policy is essential:

• Financial protection

It offers financial protection for your loved ones. It ensures that they are not burdened with immediate financial challenges in the event of your untimely demise.

• Debt coverage

It can help cover outstanding debts, such as mortgages, loans, and credit card balances. This prevents your family from inheriting these financial obligations.

• Income replacement

If you are the primary breadwinner, your sudden absence could leave your family without a stable source of income. Life insurance replaces lost income, providing your dependents with a safety net.

• Business continuation

For business owners, life insurance can facilitate a smooth transition of ownership in case of a partner's or key employee's death.

Get life insurance for guaranteed protection, tax benefits, and future stability. Plan today, secure tomorrow—Check plans and get quote!

How to choose the right life insurance policy in India?

In India, buying a life insurance policy is easier than ever before. Here are some simple steps to guide you through the process:

• Determine your insurance needs

The first step to buying a life insurance policy in India is to assess your coverage needs. Calculate your monthly expenses, outstanding debts, future financial goals, and other expenses that you might incur in the future.

• Choose the policy type

India offers various life insurance policies, including term insurance, endowment policies, and unit-linked insurance plans. Select the policy type that best fits your needs and financial goals.

• Research insurance providers

Research and compare the various life insurance providers in the market. Check their reputation, financial stability, customer service support, and claim settlement ratio.

• Fill out an application form

After choosing the insurance provider, fill out an application form providing accurate information. This includes personal details, medical history, tax information, policy details, and payment mode.

• Medical examination

Some insurance policies require a medical examination before approval. If necessary, schedule for a medical examination and obtain relevant certificates from licensed medical practitioners.

• Pay premium

After submitting the necessary documentation, choose a premium payment plan that suits your financial constraints.

• Policy issuance

Once the insurance provider verifies your documents and receives the premium payment, they issue the policy documents.

Tax benefits on different types of life insurance

Understand the tax benefits for different types of life insurance:

  • Term life insurance – Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act, up to Rs. 1.5 lakh per year. The death benefit received by nominees is tax-free under Section 10(10D).
  • Whole life insurance – Policyholders can claim tax deductions on premiums under Section 80C, while the maturity benefit is tax-free under Section 10(10D), provided the sum assured is at least ten times the annual premium.
  • ULIPs (Unit Linked Insurance Plans) – Investments in ULIPs qualify for tax deductions under Section 80C. Additionally, the maturity proceeds are tax-free under Section 10(10D) if annual premiums do not exceed Rs. 2.5 lakh.
  • Endowment plans – Premiums paid are deductible under Section 80C, and maturity benefits remain tax-free under Section 10(10D), provided conditions under tax laws are met.
  • Pension plans – Premiums paid qualify for deductions under Section 80CCC. However, only one-third of the maturity amount is tax-free, while the remaining must be used to purchase an annuity, which is taxable.

Pro Tip

Secure your future with ULIP – a smart dual-benefit plan offering investment growth and life cover at affordable premiums

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Key factors to consider while choosing the right type of life insurance policy

Choosing the right life insurance policy is a critical decision that requires careful consideration of several factors. Here are some essential points to keep in mind while selecting the appropriate type of life insurance policy:

• Financial needs and goals

Evaluate your financial responsibilities, such as outstanding debts, mortgage, education expenses, and family's future needs. Choose a policy that aligns with your long-term financial goals.

• Analyse the policy type

Understand the two primary types of life insurance: term life and permanent life. Term life offers coverage for a specific period, while permanent life provides lifelong coverage and an investment component.

• Coverage amount

Determine the optimal coverage amount that would adequately protect your family's financial well-being in your absence. It should account for debts, ongoing expenses, and future needs like college tuition.

• Affordability

Consider your budget and affordability for insurance premiums. Term life policies tend to be more affordable initially, while permanent policies may have higher premiums due to the investment component.

• Term length

If opting for term life insurance, select a term length that corresponds with your financial obligations. For instance, if you have a 20-year mortgage, a 20-year term policy could cover the mortgage period.

• Health and medical considerations

Your health and medical history influence the cost of premiums. Be transparent about your health to avoid issues during the claims process.

• Riders and add-ons

Explore optional policy riders that offer additional benefits, such as accelerated death benefit, waiver of premium, or critical illness coverage. Choose those that align with your specific needs.

• Policy reviews and flexibility

Ensure the policy allows for periodic reviews and adjustments to accommodate changing circumstances or financial goals.

• Insurance provider reputation

Choose a reputable and financially stable insurance provider with a track record of honouring claims.

• Policy conversion

If selecting a term policy, check whether it offers the option to convert to a permanent policy later without the need for a new medical exam.

• Understand policy terms

Thoroughly read and understand the policy terms, including exclusions, limitations, and conditions for payouts.

In conclusion, selecting the right life insurance policy involves assessing your financial needs, goals, and circumstances. Evaluate the available options, compare quotes, and seek professional advice if necessary to make an informed decision that provides your loved ones with the necessary financial protection.

Know more about health insurance.

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Frequently Asked Questions

What are the 2 main types of life insurance?

The two primary types of life insurance are term life insurance and permanent life insurance. Term life insurance provides coverage for a limited period, typically between 1 to 30 years, and pays out only if the policyholder dies during that period. Permanent life insurance provides coverage throughout the policyholder's life and encompasses subcategories such as whole life, universal life, and variable life.

How many types of life insurance are there?

Besides term life insurance and permanent life insurance, other types of life insurance include endowment policies, critical illness policies, and group life insurance. Each type of insurance provides different types of coverage and benefits and comes with its unique features.

Life insurance covers your family’s future—debts, income, education, and more. Check plans and secure your future today!

What are the life insurance tax benefits?

Life insurance provides several tax benefits, including tax-free death benefits, tax-deferred cash value accumulation, and tax-free withdrawals. Several life insurance policies qualify for tax deductions, including term life insurance, permanent life insurance, and group life insurance.

How much does life insurance cost?

The cost of life insurance depends on several factors, such as the policy type, the level of coverage, the policyholder's age and health status, and the risk assessment of the insurer. In general, term life insurance is more affordable than permanent life insurance.

What type of life insurance policy never expires?

Whole life insurance is a type of permanent life insurance that covers the policyholder throughout their entire lifetime, and it never expires as long as the policyholder pays the premiums.

What's the difference between whole life and term life insurance?

The primary difference between whole life and term life insurance is the duration of coverage. Whole life insurance provides lifetime coverage, while term life insurance provides coverage for a limited period. Whole life insurance also accumulates cash value over time, whereas term life insurance does not. Whole life insurance is more expensive than term life insurance due to its additional benefits and lifetime coverage.

Which are the three main types of life insurance?

The three main types of life insurance are term life insurance, whole life insurance, and universal life insurance. Term life insurance offers temporary coverage, whole life insurance provides lifetime coverage with cash value, and universal life insurance combines flexible premiums with a cash value component.

Which are the four types of permanent life insurance?

The four types of permanent life insurance are whole life insurance, universal life insurance, indexed universal life insurance, and variable life insurance. Each offers lifetime coverage with a cash value component, but they differ in premium flexibility, investment options, and cash value growth.

Can I get two different types of life insurance policies at the same time?

Yes, you can hold multiple types of life insurance policies simultaneously. For instance, you might combine term life insurance for affordable coverage with whole life insurance for lifelong protection and cash value accumulation, addressing different financial needs and goals.

Is it complicated to calculate premium for term insurance online?

No, calculating the premium for term insurance online is simple and quick. You can use a term insurance premium calculator by entering details like age, sum assured, and policy tenure to get an instant estimate.

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