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Life Insurance : Buy Life Insurance Policy in India 2024

Life Insurance Policy : Secure Your Future and Your Loved Ones with Life Insurance Plans. Learn about various Life policies, Tax Benefits & coverage options.

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Life Insurance

Home / Life Insurance

What is life insurance?
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A life insurance policy is a contract-based promise established between the policyholder, who is the insured individual, and the insurer. Under this agreement, the policyholder is required to make periodic premium payments to the insurer. In return for these premiums, the insurer commits to providing a sum of money, known as the death benefit, to the beneficiary chosen by the policyholder, in case of the policyholder's demise.

The primary purpose of life insurance is to secure the financial well-being of the policyholder's family after their passing. This financial protection can be utilised to cover various expenses, such as paying for funeral costs, clearing loans, and other ongoing living expenses.

Life insurance policies come in different types, with Whole Life and Term Life being prominent options. In the case of Term Life insurance, coverage is provided for a predetermined term. If the insured person passes away during this period, the selected beneficiaries receive the death benefit. However, if the person survives beyond the term, no payout is made. On the other hand, Whole Life insurance offers a cover for the entire life of the insured person, and regular premiums are paid by the policyholder throughout their lifetime.

How does life insurance work?
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Life insurance operates on a simple concept. 

Let's consider an example to better understand how life insurance works in India. 
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Meet Mr. Kumar, a 35-year-old married man with two young children. Concerned about the financial well-being of his family in case of his untimely demise, Mr. Kumar decided to go for a Term Life Insurance policy.

Types of life insurance policies in India
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Here’s a list of different types of life insurance policies in India.

Term Life insurance
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Here, the policyholder pays a fixed premium for a specific term. If the policyholder does not survive this period, the insurer offers the death benefit to the assigned beneficiary. However, if the insured person survives the policy term, they do not receive any payout. This type of life insurance plan is the most straightforward and cost-effective option available.

Whole Life insurance
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Under this type of policy, the policyholder makes consistent premium payments throughout their lifetime in exchange for lifetime coverage. Upon the policyholder's passing, the designated beneficiary receives the death benefit as per the terms of the policy.

Endowment Plan
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This plan offers both savings and financial support. Throughout the policy tenure, the policyholder pays regular premiums. If the insured person survives the policy duration, the insurer pays a lump sum amount at the end of the term. However, if the policyholder passes away before the maturity date, the designated beneficiaries will receive the death benefit.

Unit-linked Insurance Plans (ULIPs)
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ULIPs provide a combination of investment opportunities and life insurance coverage. The policyholder's premium payments are allocated to different funds, which they can choose according to their investment goals and risk tolerance.

Pension Plan
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This type of policy focuses on the pension element. Throughout their working career, the insured pays regular premiums, and after retirement, the insurance company provides the policyholder with a consistent income. In the event of the policyholder's demise, either before or after retirement, the designated beneficiaries will receive the death benefit.

Return of Premium
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In this type of policy, premiums are refunded when the policy term ends. Thus, it comes with survival benefits and can be an inclusion in some other type of plan as well.

Discover what the media is saying about Acko Life Insurance
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India gets 2 more life insurance players; IRDAI awards licences after a gap of 12 years
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In the 121st meeting of Insurance Regulatory and Development Authority of India held on 25th March 2023 (sic), two new entities namely Acko Life Insurance Ltd Read More

IRDAI approves two new life insurance companies
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Two new life insurance businesses have received approval from the Insurance Regulatory and Development Authority of India (IRDAI). Acko Life Insurance Ltd. and Credit Access Life Insurance Ltd. received certificates at the Insurance Regulatory and Development Authority of India's 121st meeting Read More

ACKO Receives Life Insurance Licence From IRDAI
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Bengaluru-based insurtech unicorn ACKO has become one of a select few life insurers in India, having been granted a licence by the Insurance Regulatory and Development Authority of India (IRDAI) Read More

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Comparison of different Life Insurance Plans in India 2024
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Here’s a table designed to provide you with a snapshot of different Life Insurance Plans in India.

Parameter

Term Plan

Whole Life Plan

Endowment Plan

ULIP

Return of Premium

Pension Plan

Duration in years

5 to 85

Till the time you cross 100 years of age

5 to 35

10 to 20

5 to 65

Entire life

Availability of maturity benefit

Conditional upon the inclusion of Return of Premium option

Maturity on completing 100 years of age

When policy term ends

When policy term ends

Survival benefit

Income at periodic intervals till policyholder is alive

Benefits of a Life Insurance Policy
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Here are some prominent benefits of having a life insurance policy in India.

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Financial protection for loved ones
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Life insurance offers financial security to the insured person's family in the event of the policyholder's death. This support can help cover outstanding debts, daily living expenses, children's education, and other financial obligations, ensuring that the family's financial well-being is protected.

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Peace of mind
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Life is unpredictable, and uncertainties are part of life's journey. Having a life insurance policy gives policyholders peace of mind, knowing that their family will be taken care of financially even if they are not around to provide support. This sense of security allows individuals to focus on their daily lives and future goals without worrying about financial uncertainties.

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Accumulation of savings
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Certain types of life insurance policies, such as Endowment Plans and Whole Life Insurance, come with a savings component. Over time, these policies build cash value, which can be leveraged through policy loans or withdrawals. This accumulated savings can be utilised to meet various financial needs, such as funding a child's higher education or planning for retirement.

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Tax benefits
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Life insurance policies offer tax advantages, making them an attractive investment option. The premiums for life insurance policies are eligible for tax deductions. Additionally, the death benefit received by the beneficiaries is usually tax-free.

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Supplementing retirement income
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Life insurance policies with a savings component can serve as an extra source of income during retirement. Depending upon the chosen policy, the accumulated cash value can be withdrawn or received as regular payouts to supplement retirement income, providing financial independence in the golden years.

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Loan facility
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Many life insurance policies allow policyholders to avail loans against the cash value of the policy. This loan can be utilised during emergencies or to meet any financial requirements without surrendering the policy.

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Business continuity
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Business owners can purchase a suitable life insurance policy to financially protect their companies from financial losses in the event of the death of a key employee or business partner.

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Financial legacy
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Life insurance allows individuals to create an inheritance for their heirs and leave a financial legacy for the family’s future.

Why is buying life insurance a good idea?
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Apart from the benefits stated in the previous section, here’s why buying life insurance is a good idea.

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Dealing with outstanding debts
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If you have significant debts, such as a home loan, car loan, or personal loans, the death benefit received by your beneficiaries can be used to pay off these debts, preventing them from inheriting financial liabilities.

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Protecting your family's future
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Life insurance is a tool to protect your family's future financial goals and aspirations. Whether it's funding your children's education or ensuring a comfortable retirement for your spouse, a life insurance policy provides a way to secure your family's long-term financial well-being.

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Affordable and accessible
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Life insurance policies come in various types and coverage amounts, making them affordable and accessible to people from all walks of life.

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Locking in lower premiums
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Purchasing life insurance early in life allows you to lock in lower premiums. Premiums tend to increase with age and health conditions, so buying a policy when you are young and healthy can save you money in the long run.

Factors that affect Life Insurance premium
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Let's explore the most significant elements that impact the cost of life insurance in India.

Do's and Don'ts of Life Insurance Policy
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Do's of Life Insurance Policy:

Don'ts of Life Insurance Policy:

Assess Needs: Understand your financial goals.

Avoid Unnecessary Riders: Choose relevant ones.

Compare Plans: Research before choosing.

No False Information: Be truthful.

Know Policy Details: Read and ask questions.

Not Just for Tax: Focus on coverage.

Choose Right Type: Match policy to your goals.

Avoid Over-Insuring: Get needed coverage.

Honest Information: Truthful health and habits.

Think Before Cancel: Consider implications.

Pay Premiums On Time: Avoid lapses.

Update Nomination: Reflect life changes.

Nominate Beneficiary: Ensure smooth claims.

Renew Timely: Prevent policy lapse.

Review Regularly: Update as life changes.

Supplement Employer's Cover: Get personal policy too.

Keep these tips in mind when navigating life insurance options in India.

Investment Return Calculator (Power of Compounding)
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Compounding in life insurance refers to the accumulation of bonuses and returns on the policy's sum assured and any accumulated earnings from previous years. As these bonuses and returns are added back to the policy's value, they grow further and generate more returns in subsequent years.

Using the Investment Return Calculator
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Life Insurance Policies that offer compounding benefits
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Several life insurance policies in India come with compounding benefits to help policyholders maximise their returns. Some of the most popular options include the following.

Calculate Term Insurance premium
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The premium you pay for Term Insurance depends on several factors, including age, sum assured, policy term, health condition, and lifestyle habits. Accurately calculating the premium ensures that you get sufficient coverage without overburdening your finances.

Here’s an example explaining how to calculate Term Insurance premium. 

Meet Rahul, a 30-year-old software engineer, who is keen on securing his family's financial future with a Term Insurance plan. 

Step 1: Determine your coverage needs.
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Rahul assesses his family's financial requirements, which include clearing outstanding loans, supporting his children's education, and ensuring a comfortable lifestyle for his family. After thorough consideration, he arrives at a sum assured of INR 2 Crore.

Step 2: Use online premium calculators.
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To get an estimated premium amount, Rahul uses an online premium calculator. He inputs his age (30 years), the sum assured (INR 2 Crore), and selects a policy term of 30 years. As Rahul leads a healthy lifestyle without any smoking or alcohol consumption, the calculator provides him with an estimated premium of INR 15,000 per year.

Step 3: Compare different plans.
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With the estimated premium in mind, Rahul begins comparing various term insurance plans offered by different insurers. He carefully reviews the features, additional riders, and customer reviews to shortlist the plans that align with his needs. After conducting thorough research, he narrows down the choices to a few promising policies, and purchases the most suitable one.

How to buy the best Life Insurance Policy online from ACKO
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Here’s how you can buy the best life insurance policy that suits your requirements from ACKO via our seamless online process using our website/app.

Note that this is a generic process, and the exact steps can vary depending upon the chosen plan and other details.

FAQs for Life insurance
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Here are some common questions about Life Insurance plans.

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Can I purchase a Life Insurance policy online?

Yes, a lot of insurance providers offer life insurance coverage online. From the convenience of your home, you can compare policies, determine rates, and purchase policies online.

What does a Life Insurance policy rider mean?

You can add a rider to increase your Life Insurance policy’s coverage. Riders offer extra benefits such as Critical Illness coverage, Disability coverage, Accidental Death compensation, and Premium Waivers.

Is my Life Insurance policy a good collateral for a loan?

Yes, several types of Life Insurance plans, including Whole Life and Endowment Policies, let policyholders borrow a loan against them. The loan amount is typically limited to a portion of the policy payout and has an interest charge.

What is the minimum age to buy a life insurance policy in India?

The minimum age to buy a life insurance policy in India is 18 years.

Can a person have multiple life insurance policies in India?

Yes, a person can have multiple life insurance policies in India, subject to the insurer's terms and conditions.

Are there any tax benefits of buying a life insurance policy in India?

Yes, premiums paid towards life insurance policies are eligible for tax benefits under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh.

Is it mandatory to undergo a medical examination before buying a life insurance policy in India?

It depends on the age and sum assured of the policy. For higher sum assured or older age, a medical examination may be required.

Can a person buy a life insurance policy online in India?

Yes, many life insurance companies in India offer the option to buy policies online through their websites or mobile apps.

Here are some common questions about Life Insurance Plans in India.

Is life insurance worth buying?

Yes, life insurance is worth considering in India. It provides a safety net for your family, replaces your income, and helps achieve future goals. Premiums are affordable, and there are tax benefits too. It's an investment in your family's security and peace of mind.

How much life insurance cover do I need?

To determine your life insurance coverage, consider your family's daily expenses, outstanding debts, future goals, income replacement, and potential medical/funeral costs. Add these up for a good estimate of the sum assured you need to set while buying the policy.

What is a life insurance premium?

A life insurance premium is the money you pay regularly to your insurance company. It's like a safeguard for your family. If something happens to you, they get financial help.

Why is buying life insurance important?

Life insurance is super important in India. It's like a safety cushion for your family. If something happens to you, they get money to help with expenses and future plans. It's a way of showing love and responsibility. Plus, it can give you tax benefits. Stay smart, get life insurance!

Is life insurance benefit paid in a lump sum?

Yes, in India, life insurance benefits are usually paid as a lump sum amount. This means your loved ones receive a single, larger payment all at once, providing them financial support when needed most.

What will happen if my life insurance nominee dies before me?

In an unfortunate event where your life insurance nominee passes away before you, you need to appoint another nominee. You can easily update your nominee by contacting your insurance company. They'll guide you through the process so that your family is financially protected against the worst.

Life insurance and critical illness cover, do I need both?

When it comes to life insurance and critical illness cover in India, think of them as different types of protection.

  • Life insurance helps secure your family's financial future if something happens to you. It gives them a payout to cover expenses.

  • Critical illness cover, on the other hand, offers a lump sum if you're diagnosed with a major illness. It helps you manage medical costs and recovery.

Having both adds extra security, like having two safety nets. It's a personal choice based on your needs and peace of mind. Chat with a financial advisor to decide what's best for you!

What is the maximum age for life insurance?

In India, most life insurance companies offer policies up to around 70-80 years old. It's smart to consider it sooner for better rates. 

How many life insurance policies can a person buy?

In India, there's no specific limit to how many life insurance policies you can buy. It's up to you and what you need. Just remember, while it's okay to have more than one policy, it's important to choose wisely and consider your budget. If you're unsure, it's a good idea to talk to a financial advisor for guidance. 

How to file a life insurance claim?

Here's a quick guide on how to file a life insurance claim in India:

  • Collect Documents: Gather the policy document, death certificate, and ID proofs.

  • Notify Insurer: Inform the insurance company about the policyholder's passing.

  • Get Forms: Obtain claim forms from the company, or download them from their website.

  • Complete Forms: Fill the forms accurately, including nominee details.

  • Attach Documents: Submit the forms with death certificate and ID proofs.

  • Review Process: The company will review the claim and documents.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.