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Types of Life Insurance Policy In India

Selecting the right life insurance policy is necessary for a life of comfort and convenience. A life insurance policy ensures that one's dependents will be adequately cared for in their absence but also helps create a significant corpus to meet their future financial objectives. In India, various life insurance policies allow individuals to tailor their choices based on their needs. Here is a list of different types of life insurance policy available in India 2024 and their benefits in detail.

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What are the 2 Main Types of Life Insurance Policy?

Life insurance plans protect your family members from the uncertainties of life, like accidents, illnesses, or worse, death. Therefore, you must buy the right plan for yourself and your loved ones.

Life insurance can be broadly categorized under the following two types:

  • Pure Protection Plan/Term Insurance: Term Insurance Plan, also known as a pure protection plan, offers a lump sum death benefit to the family or loved ones in the event of the policyholder's unfortunate death, providing financial security for their future.

  • Savings Plan: A Savings Plan offers life coverage benefits and helps you plan for long-term goals, like buying a home or funding your child’s higher education. It also ensures future returns if you outlive the plan. The different types of life insurance saving plans include endowment plans, ULIP, retirement plans, child insurance plans, money-back plans, etc.

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What Are The Different Types of Life Insurance Policy Available In India 2024?

Here is a list of the different types of life insurance products that are offered by the top life insurance companies in India in 2024:

Types of Life Insurance Plans in India Types of Life Insurance Plans in India
Types of Life Insurance Policies Overview
Term Life Insurance/ Term insurance plan  Long-term financial protection for your family members 
Term Insurance with Return of Premium Returns all the premiums paid at the end of the policy term on survival of the policy
Whole Life Insurance Provides life insurance coverage for the entire life until 99 or 100 years.
Endowment Plan Guarantee of receiving the intended amount at maturity
Money Back Policy Provides periodic payouts during the policy term, with a portion of the sum assured returned at specific intervals 
Retirement/Pension Plans Help to create a retirement corpus so that you can live a stress-free post-retirement life
Unit Linked Insurance Plans (ULIP) Investing in a combination of diversified equity and debt funds with 5 years of lock-in time for partial withdrawals. 
Child Insurance Policy Helps secure the future of your child such as higher education and marriage in case of your untimely death
Group Life Insurance plan  Offer life insurance coverage to a group under a single plan, particularly to company employees.

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. It provides death benefits to the nominee if the policyholder dies during the term. No benefits are paid if the policyholder survives the term. 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 policies also give you the option of 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 understand this with the help of an example:
    A 20-year-old non-smoking, healthy male can secure a life cover of Rs. 1 Crore for his family members for the coming 30 years if he buys a term plan worth Rs. 518 per month.

  2. Term Insurance with Return of Premium

    • Term return of premium plans 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 plan, you can receive the entire premium amount you paid on outliving the policy term. Moreover, you can calculate the premiums easily for term insurance using an online term insurance calculator.

    For example: A 20-year-old non-smoking, healthy male can secure a life cover of Rs. 1 Crore for his family members for the coming 30 years if he buys a term plan worth Rs. 1,122 per month.

  3. Whole Life Insurance

    • Whole life insurance plan is one of the types 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 those individuals who have financial dependents in old age also. One of the main benefits of this plan is that it provides lifetime protection to the policyholder and leaves a legacy for their kids.

    • These plans offer financial stability. After the payment of 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. 

  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 plan term, the beneficiary/nominee receives a death payout. 

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

  5. Money Back Policy

    • Money back policies are the types of life insurance policy where 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 types 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 the dreams of your family in case you outlive the policy term.

  6. Retirement/ Pension Plans

    • Retirement plans are types of life insurance policy that are specifically designed to build a large corpus for your after-retirement days that help you financially in your non-working years. These plans allow saving and then investing 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.

  7. 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, as well as builds wealth through market-linked returns from systematic investments. With this, you get the opportunity to invest your amount in different options of funds 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.

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

  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 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.

  9. Group Life Insurance

    • Group Life Insurance Policy is one of the types of life insurance policy that is provided to a group of individuals, generally as an employment benefit. The main purpose of group life insurance plans is to offer financial freedom, support, and protection to the family of the concerned employee in case of any eventualities. 

    • In case of the employee’s death, when employed with the company, the corresponding group insurance plan would offer the much-required financial guarantee to the inconsolable family. This policy is not only limited to an employer-employee group but also extended to other organizations like bank customers, non-banking financial organizations, NGOs, microfinance institutions, and professional groups.

    • Some of these types of life insurance policies also offer coverage for outstanding loans to a group of debtors, while some come up with disability and critical illness benefits.

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: There are various types of life insurance policies available in India with different policy terms. You should select a plan with a suitable policy term that will help you achieve your desired goals in life.

  • Available Riders: Most types of life insurance policies offer the option of adding riders to the base plan. These riders can enhance your sum assured and cover eventualities such as:

    • 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 and solvency ratio along with the plan's exclusions.

  • Consultation: Consult a financial advisor for additional information and advice on what are the best types of life insurance policy for you and your family if you have any doubts.

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What are the Important Points to Remember while Buying a Life Insurance Plan?

Below are some of the key points to keep in mind before you buy life insurance plan:

  • Remember your responsibilities and future life goals before choosing a life cover.

  • Check the claim settlement ratio (CSR) for 5 consecutive years of the insurer from which you want to buy life insurance plan.

  • Keep in mind the premium amount, due date of premium payment and all the necessary information regarding the plan that will help you in the long run.

  • Ensure you ask about the additional benefits/riders before buying the life insurance plan.

  • For ease in the life insurance claim process, ensure your nominees know the location of the insurance documents and other credentials.

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

FAQs

  • Q: What is the most common kind of life insurance?

    Ans: In India, term life insurance is the most common form of life insurance plan for providing enough long-term financial security to the family. When it comes to long-term investment plans, ULIPs are the most popular. ULIPs are diverse investment alternatives with flexible withdrawal circumstances, making them a good long-term investment.
  • Q: What kind of life insurance policy is the longest?

    Ans: Whole life insurance policies are considered the longest life insurance policies. They will continue until you reach the age of 100. If you live to be 100 years old, most whole life insurance policies will repay the sum promised to you and expire.
  • Q: What is the difference between the whole life insurance and term life insurance?

    Ans: Whole life insurance and term life insurance differ significantly in two key aspects:
    • Whole life insurance remains in effect until your natural demise or until you reach the age of 100. On the other hand, term life insurance has a specific duration that must conclude before you turn 100.
    • Whole life insurance incorporates an investment component, leading the policy to accumulate a cash value over time. In contrast, term life insurance lacks an investment component, resulting in the policy not accruing any cash value.
  • Q: Is whole life insurance more expensive than term life insurance?

    Ans: Whole life insurance premiums are often higher than term insurance premiums. Yet, unlike term insurance, when prices increase upon renewal, premiums for whole life insurance remain constant throughout your life.
  • Q: Can I get two different life insurance policies at the same time?

    Ans: Yes, you may purchase many sorts of life insurance coverage. Many people invest in numerous forms of life insurance to build a well-rounded investing and financial portfolio. But make sure you let the insurer(s) know about all the active plans.
  • Q: What is Term Insurance?

    Ans: Term Insurance, also known as a pure protection plan, provides a lump sum payment (death benefit) to your family or loved ones if you die unfortunately during the policy term, ensuring their future security.
  • Q: What does an Endowment Plan offer?

    Ans: An Endowment Plan combines life insurance and wealth creation. It provides a lump sum payout upon maturity and a death benefit to the nominee in case of the policyholder's demise during the term.
  • Q: Can I plan for long-term goals with life coverage benefits?

    Ans: Yes, you can plan for long-term goals with life coverage benefits, as certain financial products offer life coverage benefits and help you plan for long-term goals like buying a home or funding higher education. They also ensure future returns if you outlive the plan.
  • Q: How to buy life insurance policy from Policybazaar?

    Ans:Begin by visiting the Term Insurance page, where you'll input your personal details like name, contact information, gender, and date of birth. Share additional information about your occupation type, annual income, educational background, and smoking habits. Once done, choose the most suitable plan and proceed with the payment process.
  • Q: What are the 2 main types of life insurance policies?

    Ans:The two main types of life insurance policy are term insurance plans and savings or investment plans. Term life insurance plans provide pure risk cover and no wealth creation component, whereas saving plans provide both life cover and wealth creation.
  • Q: What are the different types of life insurance policies available in India?

    Ans: Here is a list of all the different types of life insurance policies available in India:
    • Term life insurance
    • Term Return of Premium Plans
    • Whole Life Insurance Policy
    • Endowment Plans
    • Money Back Plans
    • Retirement Plans
    • Child Insurance Plans
    • Unit Linked Insurance Plans
    • Group Life Insurance Plans
  • Q: What are the benefits offered by different types of life insurance policies in India?

    Ans: The main benefits that almost all types of life insurance plans offer are as follows:
    • Financial security
    • Long term coverage
    • Wealth creation
    • Tax benefits
  • Q: What are life insurance tax benefits in India?

    Ans: The life insurance tax benefits are covered under 80C and 10(10D) of the Income Tax Act, 1961. You can consult your financial advisor and avail of these benefits as per the prevailing tax laws.
  • Q: Are riders a type of life insurance policy?

    Ans: No, riders are not a type of life insurance policy. They are an add-on benefit that can be added to the base policy to enhance the coverage of your term or life insurance plan. The most common riders available in India are critical illness, terminal illness, accidental death benefit, accidental total and permanent disability benefit, waiver of premium, and hospicare benefit riders.

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