Types of Life Insurance Policy In India

Different Types of Life Insurance Policies In India 2025?

Life insurance plans can be classified broadly into whole life, term life insurance, ULIP i.e., Unit Linked Insurance Plan and more available in India 2025:

Types of Life Insurance Plans: An Overview

Let’s discuss the insurance products in detail: 

1. Term Life Insurance

   Term life insurance is the most convenient and affordable form of life insurance plans in India. This type of life insurance plan in India that you can for a specific tenure of 10 years, 20 years, 30 years or more years. It provides death benefits to the nominee if the policyholder dies during the term. Term insurance is pocket-friendly compared to other life insurance because it helps protect, not save. Unlike policies with maturity benefits, term insurance only pays out if you pass away during the policy term. This simplicity keeps costs low and easily compare term plans, making it a cost-effective way to get high coverage. 

   But certain variants of term plans also offer payouts on maturity, like TROP (Term plan with return of premium) and 100% refund of premiums at no cost term insurance if the policyholder survives the policy term.

   These types of life insurance policy also allow adding riders with the base plan, such as accidental death benefit or critical illness. These important term insurance riders provide you and your loved ones additional protection at a nominal premium paid along with the regular premiums.

   Let’s make this easy to understand with the help of an example:
   Raj, a 35-year-old software engineer, purchases a 20-year term life insurance plan with Rs. 1 Crore term insurance cover. If Raj passes away during the term, his family will receive the Rs. 1 Crore death benefit. However, no benefits are paid in regular term insurance if he survives the term.

   Also Read: Term Insurance Benefits

2. Term Insurance with Return of Premium

   Return of Premium Life Insurance is the term plan variant that offers a benefit amount to the nominee in case of the policyholder’s untimely death or provides the entire premiums paid at the end of the policy term as a maturity benefit.

   Under this type of term insurance with return of premium plan, you can receive the entire premium amount you paid on outliving the policy term. Moreover, using an online term plan calculator, you can calculate the premiums easily for term insurance.

   For example: Meera, a 30-year-old teacher, opts for a 15-year term insurance with a return of premium plan. She pays Rs. 20,000 annually excluding taxes. If she survives the 15-year term, she gets back all the premiums paid, totalling Rs. 3 lakhs (excluding taxes). Her beneficiaries receive the death benefit if she passes away during the term.
   Also read: 7 factors to consider before buying life insurance.

3. Unit Linked Insurance Plans – ULIPs

   ULIP plans provide the dual benefits of investment and insurance. It provides a life cover that offers financial security for your family members and builds wealth through market-linked returns from systematic investments. With this, you can invest your amount in different fund options depending on your risk appetite.

   These types of life insurance policies come with a lock-in time of 5 years, and the amount can be invested in hybrid funds, equities, bonds, etc. They offer the option of fund-switching and partial withdrawals. They also provide wealthy boosters and loyalty additions that help generate more wealth.

   For example: Kavita, a 29-year-old earning female, purchases a ULIP that combines life insurance with investment. Part of her premium goes towards a life cover, while the rest is invested in equity and debt funds. She can track her investment performance and make adjustments as needed.

   *All savings are provided by the insurer as per the IRDAI-approved insurance plan.. Standard T&C Apply

4. Endowment Insurance Plan

   An endowment plan is a life insurance plan that offers dual benefits of life cover and wealth creation. With this plan, you can receive a lump sum payout on the plan's maturity. In case of the policyholder's death during the policy term, the beneficiary/nominee receives a payout upon death. 

   Endowment plans are suitable for individuals who want guaranteed returns with life insurance protection. These plans also allow you to benefit from bonuses, payable over and above the policy’s life cover.

   For example: Priya, a 28-year-old nurse, invests in a 20-year endowment plan with a sum assured of Rs. 25 lakhs. If Priya survives the policy term, she will receive Rs. 25 lakhs along with bonuses, if any. If she suffers an unfortunate death during the term, her family receives the death benefit.

5. Whole Life Insurance

   Whole life insurance plan is a type of life insurance policy that provides you coverage for 99 or 100 years. In comparison to a short tenure of 10 to 30 years, the long coverage time of these plans ensures family protection for an extended time.

   This plan is ideal for individuals who have financial dependents in old age. One of the main benefits of this plan is that it provides lifetime protection to the policyholder and leaves a financial corpus for their kids.

   These plans offer financial stability. After paying premiums of 5 years, you receive a guaranteed income at maturity. In addition to this, the income received from this plan is free of taxes, subjected u/s 10(10D) of the total premium amount paid. 

   For example: Sanjay, a 40-year-old business owner, buys a whole life insurance policy with a Rs. 1 Crore death benefit. This policy covers him for his entire life, and upon his death, his beneficiaries receive the Rs 1 Crore cover amount, regardless of when he passes away.

6. Money Back Policy

   Money-back policies are a type of life insurance policy in which the policyholder receives a percentage of life cover at regular intervals. Simply put, the money-back plan is an endowment policy with increased liquidity benefits and systematic payments. 

   These plans are specifically designed to meet the short-term financial goals. This policy provides survival benefits during the policy tenure. It gives you a percentage of the sum assured at regular intervals during your policy term. If you live beyond the term of these type of life insurance policy, you will receive the remaining portion of the corpus and the accrued bonus also at the end of the policy term.

   However, in case of an unfortunate event before the full term of the insurance policy is over, the beneficiaries are entitled to receive the entire sum assured regardless of the number of installments paid out, and without any deductions. 

   Money-back policies also have a maturity benefit. So, you receive a lump sum payment at maturity that can be used to protect your future or help fulfill your family's dreams in case you outlive the policy term.

   For example: Anil, a 32-year-old architect, buys a 20-year money back policy with a sum assured of Rs. 20 lakhs. Every five years, he receives 20% of the sum assured. If Anil survives the term, he also gets the remaining sum assured and bonuses. If he dies during the term, his family receives the assured sum.

7. Retirement/ Pension Plans

   Retirement plans are types of life insurance policies specifically designed to build a large corpus for your after-retirement days, helping you financially in your non-working years. These plans allow you to save and invest for a long tenure, thus providing the potential to collect a handsome amount.

   Retirement plans provide insurance benefits with which you can ensure financial protection for your family members by investing in retirement plans. These plans offer a number of options to withdraw your money like lump sum payment, regular income, or a combination of lump sum and regular.

   For example: Ramesh, a 45-year-old engineer, invests in a retirement plan that starts paying him a monthly pension from the age of 60. This ensures Ramesh has a steady income during his retirement years, providing financial security and independence.

8. Child Insurance Policy

   A child insurance policy is a saving cum investment plan that is designed to meet your child’s future financial needs. In case of an unforeseen death where the life assured’s parent passes away during the policy tenure, child insurance plans can provide instant payout to cover the expenses of a child. 

   Child Insurance Policies allow your kids to have financial support to live their dreams and gives you the advantage to start investing in the children’s plan right from the time the child is born and provisions to withdraw the savings once the child reaches adulthood. Some child insurance policies do allow intermediate withdrawals at certain intervals.

   For example: Sunil, a 35-year-old banker, buys a child insurance policy for his 5-year-old daughter. This policy ensures that if Sunil passes away, the sum assured is paid out, and the policy continues with future premiums waived. Upon maturity, his daughter receives a lump sum for her education or marriage.

Tax Benefits on Types of Life Insurance

One of the main benefits of life insurance plans in India is their tax advantages under specific provisions and various sections of the Income Tax Act of 1961. Here are a few tax benefits of life insurance discussed below:

Section 80C

You can get a tax benefit on the premiums you pay for your life insurance policy under Section 80C of the Income Tax Act, 1961. The maximum deduction allowed is up to Rs. 1.5 lakh in a financial year. This helps you save on taxes while securing your family's future.

Section 80D

Tax deductions allowed for premiums paid towards critical illness riders in the policy.

Section 10(10D)

The maturity benefit received at the end of the policy term is free from taxes under this section.

How do you Choose the Right Type of Life Insurance Policies In India?

Here is how you can select the suitable types of life insurance policy for yourself:

• Choose as per your goals: Different life insurance plans can help achieve different goals. You should always be clear about the goal that you want to fulfill with your life insurance which can help you choose the suitable types of life insurance policy.

• Consider the Life Cover (Sum Assured): Determine the needs of your loved ones as well as your daily expenses before selecting a cover that helps fulfill all of your and your family’s needs. The general thumb’s rule is that you should always choose a sum assured that is at least 10 to 15 times your yearly income. You can also use a human life value calculator to see the life cover amount you can purchase.

• Policy Term: Various life insurance policies are available in India with different policy terms. You should select a plan with a suitable policy term that will help you achieve your desired life goals.

• Available Riders: Most types of life insurance policies offer the option of adding riders to the base plan. These riders enhance your sum assured and cover and are catered to the following:

  • Accidental disability
  • Terminal illness
  • Waiver of premiums,
  • Critical illness and
  • Accidental death.

• Check Insurer’s Details: Before selecting the ideal type of life insurance policy, check the company's claim settlement, solvency ratio, customer service, and plan exclusions.

• Consultation: If you have any doubts, consult a financial advisor for additional information and advice on the best types of life insurance policies for you and your family.

Important Points to Consider Before Buying a Life Insurance Plan

Before choosing your life insurance policy, check out the important points below that you must consider before choosing the ideal types of Life Insurance Plans in India and buying the best Life Insurance.

✅ Assess Your Needs & Future Goals – Before selecting life insurance, consider your financial responsibilities, dependents, and long-term goals.

✅ Check the Insurer’s Claim Settlement Ratio (CSR) – Review the insurer’s CSR for the last five years to ensure a reliable claim process.

✅ Understand Premium Details – To avoid policy lapses, be aware of the premium amount, payment frequency, and due dates.

✅ Explore Additional Benefits & Riders – To enhance your coverage, ask about riders like critical illness, accidental death, or premium waiver.

✅ Ensure Easy Claim Processing – Inform your nominees about the policy, its location, and necessary documents to simplify the claim process.

How to Buy the Best Type of Life Insurance Plan from Policybazaar?

You can buy the best type of life insurance policy in India online from the comfort of your home using the following steps:

• Step 1: Go to the Policybazaar’s homepage and visit Life Insurance

• Step 2:Select the type of life insurance at the top (Term/Investment Plan)

• Step 3: Enter your name, contact information, gender, and date of birth

• Step 4: Fill in your occupation type, annual income, educational background, and smoking habits

• Step 5: Select the best life insurance plan for yourself and proceed to pay

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