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Features
Ref. No. KLI/22-23/E-BB/492
Types of life insurance policies include term life, which offers pure protection, and whole life or endowment plans, which combine insurance with savings or investment components.
Life insurance products have long been regarded as a cornerstone of financial planning, offering a vital safety net for individuals and their families. However, it’s often overlooked that life insurance is not a one-size-fits-all solution and various types of life insurance products are available, each designed to meet the different types of life insurance plans needs and objectives.
Some types of life insurance in India focus primarily on providing financial protection to the family of the main breadwinner, ensuring that they are supported in the event of an untimely death. On the other hand, certain types of life insurance policy serve a dual purpose, offering coverage and acting as investment vehicles or tools for retirement planning. These products can help individuals build wealth over time, ensuring a secure financial future while also providing the necessary protection. Understanding the different types of life insurance in India is essential for making informed decisions that align with one’s financial goals and responsibilities.
Term Insurance |
Annuity And Pension |
Whole Life Policy |
Retirement Insurance Plans |
Endowment Policy |
Group Insurance |
Money Back Policy |
Child Insurance |
ULIP |
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 a policy, a fixed sum of money called the sum assured is paid to the beneficiaries if the policyholder expires within the policy term.
Term Insurance Benefits
Whole Life Insurance Benefits
Endowment Policy Benefits
Many people prefer this life insurance policy because it pays periodic amounts during its term. 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
ULIP Benefits
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.
Annuity and Pension Benefits
Tax Considerations: Both annuity and pension benefits have tax implications that you should be aware of. Annuity payments are generally taxable as ordinary income, although some types of annuities may offer tax advantages.
Pension benefits may also be taxable, depending on how they are structured and funded. It’s important to consult with a financial advisor or tax professional to understand the tax implications of annuity and pension benefits and how they will affect your overall retirement income plan.
The main goal of a retirement plan, a sort of life insurance, is to provide you with stability and financial security after retirement. Investing in retirement plans can build an ongoing, reliable income stream. If you keep making investments until you retire, the plan will assist you in covering your living costs.
Throughout your working life, you are mandated to invest a set portion of your income regularly. The money you save will be transformed into a steady income stream when you retire. Death benefits are another aspect of retirement programs.
Retirement Plan Benefits
A group life insurance policy is a type of life insurance that covers a group of people inside a single insurance policy. Group insurance covers a minimum of 10 members, unlike individual life insurance policies, which cover one person for a specific period.
Employers, banks, corporations, and other homogeneous groups can buy group Life Insurance policies for their employees and customers. While employers would want to offer financial protection to their employees’ families, banks and lending institutions aim to keep the debt off the borrowers’ families after their death.
Group Insurance Plan Benefits
Child insurance plans are designed to provide financial security for a child’s future, covering their educational expenses and other needs. These plans combine life insurance coverage with a savings component to ensure that funds are available when the child reaches adulthood.
Benefits of Child Insurance Plans
Buying a life insurance plan can seem overwhelming with so many options available. But don’t worry, it’s simpler than you think! Here is how to go about it:
You can buy life insurance online through a website that gathers policies from different companies or directly from the insurance company’s website. These middlemen might charge a small fee for their service.
Think about what you need from your insurance. If you want coverage if something happens to you, a term plan is the way to go. Other options like endowment plans or unit-linked insurance plans exist if you want to get a lump sum later on.
Once you have picked where to buy from and what plan you want, you must provide basic details about yourself. This includes your name, birth date, whether you smoke, how much coverage you want, and how to reach you.
The premium is the amount you pay regularly to keep your insurance active. If you miss payments, your policy might lapse, meaning you won’t get any benefits. Once you’ve shared your info, the website will show you how much your premium is. Pay it online, and the insurance company will email you to confirm.
Choosing the right type of life insurance policy can be daunting, as many options are available. Each type of policy has unique features, benefits, and costs, and selecting the right one depends on your circumstances, financial goals, and personal preferences.
Individuals may have different goals. You must plan for your life insurance goals with 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.
According to several financial gurus, you should carry life insurance coverage at least ten to fifteen times your annual income. While determining the right life insurance sum, several factors must be considered. If you have debts, it may be difficult for your family to make ends meet if you pass away. You must determine the sum of the following:
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. Consider how long you will pay premiums based on your anticipated income over the next few years.
The policy term’s appropriate length is when your family financially depends on you. The usual rule is to subtract your current age from the age at which you anticipate your income to end or aim to achieve a certain life goal to determine the optimum insurance term.
Over 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.
Life insurance provides financial security and peace of mind and offers policyholders tax benefits under the Income Tax Act 1961. These tax benefits make life insurance an attractive investment option for individuals seeking to save on taxes while securing their future. Let’s delve into the various tax benefits of life insurance in India.
One of the primary tax benefits of life insurance is available on the premiums paid towards the policy. Under Section 80C of the Income Tax Act, policyholders can claim a deduction on the premium amount paid for themselves, their spouse, or their children’s policies up to a maximum limit of ₹1.5 lakh per financial year. This deduction includes other investments eligible under Section 80C, such as Provident Fund (PF), Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), etc.
The proceeds received from a life insurance policy are also eligible for tax benefits under certain conditions:
The amount received on maturity of a life insurance policy is tax-free under Section 10(10D) of the Income Tax Act, provided the premium paid during the policy term does not exceed 10% of the sum assured for policies issued on or after April 1, 2012. For policies issued before April 1, 2012, the premium paid should not exceed 20% of the sum assured.
The proceeds received by the nominee or legal heir in case of the policyholder’s death are tax-free under Section 10(10D). This ensures the family members receive the full sum assured without tax liability.
Life insurance policies often include riders or additional coverage options for enhanced protection. The premiums paid towards these riders are also eligible for tax benefits under Section 80C, subject to the overall limit of ₹1.5 lakh. Common riders include critical illness riders, accidental death benefit riders, and waiver of premium riders.
For single-premium life insurance policies, the entire premium amount is eligible for deduction under Section 80C in the year it is paid. However, the assured sum should be at least ten times the premium paid to qualify for Section 10(10D) tax benefits.
Life insurance is an essential financial product that helps individuals protect their loved ones financially in the event of an unforeseen death. India offers a variety of life insurance policies to meet the diverse needs of its citizens.
Term life insurance covers a specified period, while whole life insurance covers the policyholder’s entire life. Endowment policies combine insurance coverage with savings and investment features. Unit-linked insurance plans (ULIPs) provide policyholders with investment opportunities and insurance protection. Individuals need to understand each policy type’s features and benefits before deciding.
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.