Life Insurance

Life Insurance is a contract between an insurance policyholder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium after a set period or upon the death of an insured person.

Different Types of Life Insurance Policies in India

  1. Term Plan – pure risk cover
  2. Unit linked insurance plan (ULIP) – Insurance + Investment opportunity
  3. Endowment Plan – Insurance + Savings
  4. Money Back – Periodic returns with insurance cover
  5. Whole Life Insurance – Life coverage to the life assured for whole life
  6. Child’s Plan – For fulfilling your child’s life goals like education, marriage, etc.
  7. Retirement Plan - Plan your retirement and retire gracefully
1. Term Life Insurance

Term insurance is the simplest form of life insurance plan. Easy to understand and affordable to buy.

term insurance provides death risk cover for a specified period. In case the life assured passes away during the policy period, the life insurance company pays the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums.

There’s an option to add riders to widen up the coverage.

The death benefit is payable as lump sum, monthly pay-outs, or a combination of both.

There’s no pay-out if the life assured outlives the policy term. However, these days there are companies offering Term Plans with Return of Premiums (TROPS), where insurance companies payback all the paid premium amount in case the life assured outlives the term period. But, such plans are costlier than the vanilla term insurance plan.

Example: An individual non-smoker male who is looking for a term life plan of Rs.1 crore cover, will cost him approximately Rs.6, 800 to Rs.10, 500 per year.





25 years

40 years

Rs.1 Crore

Rs.6,800 – Rs.10,500

Best known for: High sum assured (coverage) at a low premium.

Benefit of Term Plan: In case of an untimely death of the breadwinner, family is supported with an enormous amount of money – sum assured, which helps them to replace the loss of the income caused due to the breadwinner’s death. Moreover, the money could be utilized to pay off loan, monthly household expenses, child’s education, child’s marriage, etc.

2. Unit Linked Plans (ULIPs)

A unit linked plan is a comprehensive combination of insurance and investment. The premium paid towards ULIP is partly used as a risk cover (insurance) and partly is invested in funds. One can invest in different funds offered by the insurance company depending on his risk appetite. The insurance company then invests the accumulated amount in the capital market i.e. in bonds, equities, debts, market funds, or a hybrid funds...






20 years

Rs.2 lakh


Depending on the fund value at the time of maturity.

Best known for: Long-term investment option with much more flexibility to invest.

Benefit of ULIP: Invest money as per your risk appetite. You have the option to invest either in equity, debt or in hybrid funds through the life insurance company with complete transparency.

Related Article: Term Plan Vs ULIP: What makes more sense

3. Endowment Plans

Endowment plan is another type of life insurance plan, which is a combination of insurance and saving.

A certain amount is kept for life cover – insurance, while the rest is invested by the life insurance company. In an endowment plan, if the life assured outlives the policy term, the insurance company offers him the maturity benefit. Moreover, Endowment Plans may offer bonuses periodically, which are paid either on maturity or to the nominee under death claim. On death, the death benefit is payable to the nominee.

Endowment plans are also commonly known as traditional life insurance, although, there is an investment component but the risk is lower than the other investment products and so are the returns.






30 years

Rs.10 lakh

Rs.20,000 – Rs.25,000

Depending on the Bonus at the time of maturity.

Best known for: Long-term saving option for people with much lower risk appetite for investment.

Benefit of Endowment Plan: Long-term financial planning and an opportunity to earn returns on maturity.

4. Money Back Life Insurance

Money back plan is a unique type of life insurance policy, wherein a percentage of the sum assured is paid back to the insured on periodic intervals as survival benefit.

Money back plans are also eligible to receive the bonuses declared by the company from time to time. This way, policyholder can meet short-term financial goals.







20 years

Rs.5 lakh

Rs.20,000 – Rs.25,000

A percentage of Sum Assured paid on regular intervals

Accrued bonuses/Guaranteed Money Back + Coverage

Best known for: Short-term investment product to meet short-term financial goals.

Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn returns on maturity.

5. Whole Life Insurance

A whole life insurance policy covers the life assured for whole life, or in some cases, up to the age of 100 years. Unlike, term plans, which are for a specified term.

The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim of the life assured along with bonuses if any.

However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.

The premiums are higher as compared to term plans. Whole life insurance plans also offer partial withdrawals after completion of premium payment term.





20 years

Rs.3 lakh

Rs.10,000- Rs.15,000

Guaranteed Sum Assured + non-guaranteed bonus (if any) + non-guaranteed terminal bonus (if any)

Best known for: Life coverage for whole life.

Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to leave behind a legacy for heirs.

6. Child Plan

Child plan helps to build corpus for child’s future growth. Child plans help to build funds for child’s education and marriage. Most of the Child Plan provides annual instalments or one time pay-out after the age of 18 years.

In case of an unfortunate event, the insured parent passes away during the policy term - immediate payment is payable by the insurance company. Some child plans waive off the future premiums on death of the life insured and the policy continues till maturity.






20 years

Rs.18 lakh

Rs.1 lakh

Lump sum pay-outs on regular interval

Maturity benefit + guaranteed returns + non-guaranteed accumulated bonus (if any)

Best known for: Building funds for your child’s future.

Benefit of Child Plan: Helps in fulfilling your child’s dream.

7. Retirement Plan

Retirement plan helps to build corpus for your retirement. Helping you to live independently financially and without worries. Most of the child plans provide annual instalments or one time pay-out after the age of 60 years.

In case of an unfortunate event, life assured passes away during the policy term - immediate payment is payable to the nominee by the insurance company. Death benefit will be higher of coverage or fund value or 105% of premiums paid. Vesting Benefit will be payable if the life assured survives the maturity age. In which case, pay-out will be fund value which has to be utilized for buying an annuity. Best known for: Long-term savings and retirement planning.

Benefit of Retirement Plan: Helps in building corpus for retirement.

This is just a simplified guide to different types of life insurance policies.

Get an expert's advice from on buying the right life insurance plan.