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Types of Life Insurance Policies in India

Types of Life Insurance: There are many types of life insurance policies in India that you can choose from - Term Insurance, ULIPs, Endowment Insurance, and others.

  • Sep 19, 2022

A life insurance policy provides financial protection to your family in the unfortunate event of death. At a basic level, it involves paying small monthly sums called premiums. However, depending on the type of life insurance products you have opted for at the policy’s maturity, you will receive returns the policy may have earned over the years. Also, in case of the policyholder’s untimely demise during the tenure of the policy, your family will receive a lump sum amount.

Today, there are various types of life insurance products that cater to a wide variety of needs, such as:

  • Planning for your retirement
  • Saving for a specific goal in the future
  • Planning for your children’s education
  • Ensuring a flow of income in case of the loss of your ability to earn

This article will help you know what is the classification of life insurance.

Life Insurance Policies in India:

1.Term Insurance

2.Whole Life Policy

3.Endowment Policy

4.Money Back Policy

5.ULIP Plans

6.Annuity and Pension

Types of Life Insurance Plans

Given below are the basic types of life insurance policies in India. All other life insurance policies are built around these basic insurance policies by combining various other features.

1. Term Insurance

The simplest form of life insurance product is a term insurance policy. Being a pure risk cover policy, term insurance protects the person insured for a specific period. In such type of a life insurance policy, a fixed sum of money called the sum assured is paid to the beneficiaries if the policyholder expires within the policy term.

Scenario 1: If a person buys a ₹2 lakh policy for 15 years, his family is entitled to the sum of ₹2 lakhs if he dies within those 15 years.

Scenario 2: If the policyholder survives the 15 years, though the premiums are not returned, the family is offered financial security.

Term Insurance Benefits:

  • Income Tax exemptions: The premiums paid towards term Insurance provides income tax exemption.
  • 100% risk cover: These insurance policies provide 100% risk cover, and hence they do not have any additional charges other than the basics
  • Lowest premiums: Premiums paid for term life insurance policies are the lowest in the life insurance category.

2. Whole Life Policy

A whole life policy covers a policyholder against death throughout his life. The validity of this life insurance policy is not defined; hence, the individual enjoys the life cover. Under this life insurance policy, the policyholder pays regular premiums until his death, upon which the corpus is paid to the family.

Whole Life Insurance Benefits:

  • More extended cover: The policy does not expire till the time any unfortunate event occurs with the individual.
  • Tax benefits: Premiums paid under the whole life policies are tax-exempt.

Enhanced protection: Increasingly, whole life policies are combined with other insurance products to address various needs such as retirement planning, etc.

3. Endowment Policy

Endowment policies are among the popular life insurance policies, combining risk cover and financial savings. Policyholders benefit in two ways from a pure endowment insurance policy. First, in case of death during the tenure, the beneficiary gets the sum assured. If the individual survives the policy tenure, he gets back the premiums paid with other investment returns and benefits like bonuses.

4. Money Back Policy

Many people prefer this life insurance policy because it gives periodic payments during the term of the policy. In other words, a portion of the sum assured is paid out at regular intervals. If the policyholder survives the term, he gets the balance sum assured.

Money Back Policy Benefits:

  • Corpus gain: In case of death during the policy term, the beneficiary gets the total sum assured.
  • Choice of ULIP versions: Various life insurers offer new ULIP versions of money-back policies.
  • Tax benefits: The premiums paid and the returns accumulated through a money-back policy or its ULIP variants are tax-exempt.

  • 5. ULIP

    ULIPs are market-linked life insurance products that provide life cover and wealth creation options. A part of the amount people invest in ULIP provides life cover, while the rest is invested in the equity and debt instruments for maximizing returns.

    ULIP Benefits:

    • Flexibility to invest: ULIPs provide the flexibility of choosing from a variety of fund options depending on the customer’s risk appetite; one can opt for:
    • Aggressive funds: Mainly invested in the equity market with the objective of high capital appreciation
    • Conservative funds: Invested in debt markets, cash, bank deposits and other instruments to preserve capital while providing steady returns
    • Long-term planning: ULIPs can help achieve various long-term financial goals such as planning for retirement, a child’s education, marriage, etc.

    6. Annuity and Pension

    In these life insurance policies, the insurer agrees to pay the insured a stipulated sum of money periodically. The purpose of an annuity is to protect against financial risks and provide money in the form of a pension at regular intervals.

    Thus, whatever your financial requirements, there are many types of life insurance plans to ensure that your requirement is fulfilled as per your needs and planning.

    Types of Life Insurance Plans from Kotak Life

    Life Insurance Plan

    Insurance Plan Name


    Term Insurance

    Kotak e-term

    1. Low cost insurance
    2. Multiple plan options
    3. Three pay-out options

    Savings and Investment Plans

    Kotak Assured Savings Plan

    Kotak Guaranteed Savings Plan

    1. Multiple investment options
    2. Tax benefits
    3. Premium costs

    Retirement Plans

    Kotak Lifetime Income Plan

    1. Liquidity
    2. Tax-Efficiency
    3. Surrender value

    Health Plans

    Kotak Health Shield

    1. Co-payment
    2. Pre & Post Hospitalization Expenses
    3. Network Hospital

    How to Choose the Right Type of Life Insurance Policy?

    1. Assess your life insurance goals

    Individuals may have different goals. You must plan for your life insurance goals with the aid of a suitable life insurance coverage. If protecting your family’s financial security is your primary goal, you may be able to find a term insurance plan that offers high coverage at affordable rates.

    If you want to save money for your child’s education or if you want to purchase your own dream home, think about investing in a unit-linked insurance plan. A retirement plan that can guarantee consistent income for your ongoing costs after retirement is another option.

    2. Calculate the optimal insurance cover that you need

    You should carry life insurance coverage that is at least ten to fifteen times your annual income, according to several financial gurus. While determining the right life insurance sum, there are a number of factors to take into account. If you have debts, it may be difficult for your family to make ends meet if you were to pass away. You should also put money aside for your kids’ higher education or eventual marriage. If your family’s main provider were to depart, it might be difficult for them to maintain their current standard of living due to inflation. Therefore, you must determine the total of the following:

    • Your family’s annual expenses multiplied by the number of years during which income replacement may be necessary
    • Your overall debt balance and, if applicable, the cost of paying off any mortgages
    • The sum that must be set away for future costs such as your child’s schooling, marriage, etc.
    • You can subtract the whole of your liquid assets, such as cash on hand or in the bank, as well as any other types of investments, from the expenses listed above to arrive at a suitable life insurance cover.

    3. Find the coverage offering the best bargain after calculating the premium you must pay.

    Using online premium calculators, you may figure out how much of a premium you need to pay for the required quantity of life insurance. Find the policy that provides the best protection at a price that fits your budget by comparing several ones. Take into account how long you will be paying premiums based on your anticipated income over the next few years.

    4. Select the correct policy term

    The appropriate length of the policy term is the period during which your family will be financially dependent on you. The usual rule is to subtract your current age from the age at which you anticipate your income to end or at which you aim to achieve a certain life goal in order to determine the optimum insurance term.

    5. Choose a reliable life insurance company.

    Above the course of several years, reputable life insurance providers frequently have a Claim Settlement Ratio (CSR) of over 95%. The CSR is the ratio of the company’s settled claims to the total number of claims filed during a fiscal year. You can check the most recent CSR of the various insurance carriers in India by going to the website of the Insurance Regulatory and Development Authority (IRDAI). It’s also a good idea to study customer reviews to determine how quick and easy your life insurer’s claim process is.

    Frequently Asked Questions (FAQs)

    What is Whole life insurance?

    Whole life assurance refers to a life insurance policy that is guaranteed to be in effect until the maturity date or for the insured’s entire lifespan, whichever comes first.

    What are the benefits that different types of life insurance policies offer?

    Life insurance serves as both a long-term investment and a means of financial support in the case of an untimely death. Depending on your life stage and risk tolerance, you can achieve your goals, whether they are for your children’s schooling, their marriage, creating your ideal home, or designing a carefree retirement.

    Are there life insurance tax benefits?

    Section 80C allows for the claim of a deduction for the cost of a life insurance policy where the policy is purchased in the name of the taxpayer, the taxpayer’s spouse, or the taxpayer’s children.

    How much does life insurance cost?

    A term life insurance policy with a 20-year term and a ₹50,000 death benefit costs on average roughly ₹147 per month. You should only use this figure as a starting point because your own life insurance premiums will vary based on your age, the insurer you choose, and the quantity of coverage you choose.

    How to calculate premium for life insurance policies?

    The premium for a life insurance policy is determined by the amount assured as well as other elements including age, gender, cover-up, riders, and personal behaviours like alcohol and tobacco use. The insurance companies set the premiums, which vary depending on the policyholder.

    Can I purchase two different types of life policies at same time?

    You are free to purchase as many life insurance policies as you like, but you must respect the human life value (HLV) estimate’s cap. HLV is determined by your income and may reach 20 times your annual take-home pay.

    Are riders a type of life insurance policy?

    Riders are optional, supplemental terms that take effect simultaneously with your base policy and are frequently charged separately. Insurance riders are cost-effective additions to your life insurance policy that you can select.

    Kotak e-Term

    Download Brochure


    • Life Cover till 85 years for Life & Life Secure Option
    • 3 Payout Options
    • Special Rates for Women
    • Option to exit the policy with premium refund at the age of 60*
    • Special Rates for Non-Tobacco Users
    • Free Medical Check Up every 5th year**

    Ref. No. KLI/22-23/E-BB/2435


    - A Consumer Education Initiative series by Kotak Life

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