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Life Insurance : Buy Life Insurance Policy in India 18th July 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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Home / Life Insurance

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Life insurance is like a financial safety plan. You pay a bit of money regularly to an insurance company. If something happens to you, they promise to give a certain amount of money to your family or whoever you choose. This cash helps with income replacement for covering things like debts, child education and daily expenses—for example, term insurance, whole life insurance, no cost insurance, etc.

There are various life insurance plans in India, each with unique features and benefits. Some types of life insurance (ULIPs, Guaranteed Savings, etc.) even let you save a bit extra over time. It's a way to protect your loved ones financially, even if you're not around.

What is a Life Insurance Policy?
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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 must pay the insurer a fixed amount (premium payments). In exchange 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.

How does life insurance work?
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Life insurance operates on a simple concept, so let’s understand the basics of how life insurance works in a straightforward manner.

Will Creation Benefits

Get Life Insurance
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Choose the best plan that fits your needs after comparing options.

Lower premiums

Pay Premiums
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Determine how much coverage you need, decide on an affordable premium based on your income, and pay regularly.

Personal Accident Cover

Ensure Peace of Mind
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Your family is financially secure with life coverage.

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Claim Benefits
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Easily claim death or maturity benefits according to your plan.

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Let's consider an example to 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 his family's financial well-being in case of his untimely demise, Mr. Kumar decided to go for a Term Life Insurance policy.

7 Types of Life Insurance Plans in India 
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Life insurance has always been considered an essential financial tool. Each plan comes with unique features, catering to the diverse needs of individuals from various walks of life.

To buy life insurance, you must understand how these plans function. A thorough knowledge will help you in making informed decisions. So, let's explore different policies to determine which one works best for you. 

Term Insurance Plan
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In simple terms, this plan is one of the most common, straightforward and affordable plans that provide financial protection.

The Term insurance plan works as follows:

Term insurance works on the concept of income replacement for your financial dependents in your absence i.e. ensuring that the expenses of the family related to loans (personal, home, education, etc.), kids' education, daily expenses and lifestyle expenses (travel, car, etc.) are taken care of. 

Since the purpose of Term Insurance is income replacement, it is recommended to opt for this plan till retirement age i.e. till you are expected to continue to work.

There are various Term Insurance plans that offer additional protection through riders like accidental death benefit, accidental total permanent disabilities, and critical illness. These riders add an extra layer of financial protection on top of the sum assured provided by the term plan.

Acko Life Flexi Term Plan
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One such term plan in the market is the ACKO Life Flexi Term Plan, known for its unmatched flexibility. This exclusive plan not only provides a financial safety net but also offers flexibility to policyholders. 

Learn more about ACKO Life Flexi Term Plan
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This exclusive plan not only provides a financial safety net but also offers flexibility to policyholders.

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ACKO Life Flexi Term Plan Example - Rahul’s Story
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This example demonstrates how ACKO Life Flexi Term Plan adapts to individuals' changing life circumstances.

Step 1: Find out Coverage Needs

Rahul, with an annual income of 10 lakhs, married at 30 and purchased INR 1 crore coverage (20-year term) ACKO Flexi Term Life Plan for his spouse, Rina.

Step 2: Increased Coverage as Responsibilities Grew

At 35, with two kids (Nirvana and Kabir) and a 50 lakh home loan, he increased the coverage to INR 3 Crore as his responsibilities increased. 

Step 3: Decrease Coverage 

By 45, after repaying the home loan and accumulating a substantial income corpus for his kids' education, he reduced coverage back to INR 2 crore. 

Why Choose ACKO Life Flexi Term Plan?
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Whole Life Insurance Plans
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A Whole Life Insurance plan, also known as permanent life insurance, is a unique and long-term plan that provides life coverage until the policyholder turns 100. 

Under this policy, the policyholder makes consistent premium payments throughout in exchange for lifetime coverage. Upon the policyholder's passing, the designated beneficiary receives the death benefit per the policy's terms. The primary purpose of this policy is to provide financial protection to the policyholder's family. However, if the policyholder lived beyond the maturity age, i.e. 100 years, the insurer pays the endowment coverage to the policyholder. 

Unit-linked Insurance Plans (ULIPs)
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Unit-linked insurance plans, or ULIPs, are unique life insurance plans that combine life coverage plus investment opportunities to build wealth through market-linked returns. It comes with excellent investment flexibility as the policyholder's premium payments can be allocated to different funds: bonds, hybrid funds, equity funds and more, which they can choose according to their investment goals and risk tolerance.

In simple terms, ULIPs serve as a long-term investment option with a 5-year lock-in period. It is a suitable life insurance plan for those seeking financial protection and investment growth. It means the premiums paid by a policyholder are divided into two parts. While some of it contributes to life coverage, the rest is invested in the market. 

ULIPs provide several life insurance benefits such as flexibility, market-linked returns, dual benefits, fund-switching, partial withdrawals, death benefits, ULIP tax benefits and more. However, it is crucial to gain an in-depth understanding of each factor associated with it to make informed decisions. 

Endowment Insurance Plans
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Endowment Insurance Plans or Guaranteed Return Plans are perfect for individuals wanting life cover insurance and guaranteed returns. 

An endowment plan offers both savings and financial support. Regular premiums are paid throughout the tenure, and if the policyholder lives through the policy period, the insurer pays a lump sum amount at the end. On the other hand, if the policyholder passes away before the maturity date, the designated beneficiaries will receive the death benefit. In simple terms, an endowment plan offers both maturity and death benefits to the policyholder.  

Pension Plans/ Retirement Plans
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Pension plans are considered to be long-term investment plans that provide financial protection as well as post-retirement incomes. With a pension plan, the policyholder pays regular premiums, and after retirement, the insurer provides the insured with a consistent income. The designated beneficiaries will receive the death benefit in the event of the policyholder's demise, either before or after retirement.

Term Plan with Return of Premium (TROP)
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Term Plan with Return of Premium or TROP is one of the life insurance plans that provides death benefits and guarantees a fixed return of all the premiums paid if the policyholder survives until the end of the term. 

In simple terms, TROP works like a regular term plan but with one key difference. While a standard term plan provides no maturity benefit, TROP returns all the premiums paid. With TROP, the policyholder pays premiums on a schedule that suits them - monthly, quarterly, half-yearly, annually, or in a single payment schedule. It is one of the ideal options for individuals who want a life cover policy alongside guaranteed returns. 

Child Insurance Plans
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Parenting involves several responsibilities, including ensuring financial protection for children.

Child Insurance Plans are a smart financial solution. With this plan, the policyholder pays premiums, and financial protection for their children is guaranteed. It provides maturity benefits when the child reaches 18, either as annual instalments or a lump sum. In case the policyholder passes away, an immediate payout covers the child's expenses. 

Top 10 Benefits of Life Insurance
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Financial Protection
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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, protecting the family's financial well-being.

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Peace of Mind
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Life is a thrilling journey, and uncertainties are part of it. A life insurance policy gives policyholders peace of mind, knowing their family is financially protected 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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Maturity Benefit
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Several life insurance policies, such as Endowment plans and TROP, provide maturity benefits. Such plans are ideal for individuals who want guaranteed returns of premiums paid.

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Death Benefit
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With life insurance policies, the insurer promises to pay the sum assured, known as the death benefit, to beneficiaries if the policyholder passes away during the policy term.

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Tax Benefits
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Life insurance policies offer tax advantages, making them an attractive investment option. The Policyholders can claim tax benefits under Sections 80C, 80D and 10(10D). Additionally, the death benefit received by the beneficiaries is usually tax-free.

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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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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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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 help fulfil various financial needs, such as funding a child's higher education or planning for retirement.

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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.

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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 financial requirements without surrendering the policy.

Comparison of Different Life Insurance Plans in India 2024
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Parameter

Term Insurance Plans 

Whole Life Insurance Plans

Unit-linked Insurance Plans (ULIPs)

Endowment Insurance Plans

Pension Plans/ Retirement Plans 

Term Plan with Return of Premium (TROP)

Overview

Financial protection for a specific duration 

Financial protection for a lifetime (until the policyholder crosses 100 years)

Financial protection plus investment options

Financial protection plus guaranteed returns

Financial protection plus post-retirement incomes

Financial protection plus guaranteed returns of all the premiums paid

Policy Term (Duration)

5 - 85 

Till the time you cross 100 years of age

10 - 20

5 - 35

Whole Life

5 - 65

Death Benefit (To policyholder)

Life Cover

Life Cover

Sum Assured 

Sum Assured 

Sum Assured  (Depends on T&Cs)

Life Cover

Maturity Benefit   (To nominee)

No. A Traditional Term plan does not offer

Yes, once completing 100 years of age

Yes, when the policy term ends

Yes, when the policy term ends

Yes, regular income  till the policyholder is alive

Yes, survival benefits on maturity

A perfect option for

People who want a financial safety net for their loved ones

People who want lifelong coverage for their family

People who want life coverage plus investment opportunities to build wealth

People who want life cover insurance plus guaranteed returns

People who want financial protection plus post-retirement incomes

People who want life cover insurance plus maturity benefit

12 Basic Life Insurance Terms You Should Know
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Policyholder
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Person who buys the policy and pays premiums

Premiums
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The regular amount agreed to paid (monthly, quarterly, half-yearly or annually) by the policyholder

Insurer
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The policy provider that accepts the risk and pays for losses during the policy term

Policy Term
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Total duration of financial protection and benefits

Insured Person/ Life Assured
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Person covered under the policy

Nominee/ Beneficiary
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Person selected by the policyholder for the benefits

Riders
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Add-ons for extra protection, like Accidental Death or Critical Illness

Maturity Benefit
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Amount paid by the insurer when the policyholder outlives the policy term

Death Benefit
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Amount paid to the nominee if the policyholder passes away during the policy term

Sum Assured/ Coverage
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Amount the insurer pays during a claim

Free Look Period
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A window/time the insurer gives to the policyholder to review and cancel the policy without surrender charges

Grace Period
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A window/time to pay premiums after the due date before the policy becomes inactive

Calculate Term Insurance Premium
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Life insurance is not just about providing a financial safety net to your family in your absence; it is also an investment for the future. Several life insurance policies in India come with benefits to help policyholders maximise their returns. 

On the other hand, the premium you pay for your life insurance policy depends on several factors, including age, sum assured, policy term, health condition, and lifestyle habits. Accurately calculating the premium ensures sufficient coverage without overburdening your finances. Use the ACKO insurance calculator to determine your premiums and life insurance quotes. 

🙎Meet Rahul, a 30-year-old software engineer keen on securing his family's financial future with a life insurance plan. 

Step 1: Determine coverage needs

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

To get an estimated premium amount, Rahul uses an online premium calculator. He inputs his age (30 years) and 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

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 the choices to a few promising policies and purchases the most suitable one.

Who can buy a Life Insurance Policy?
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There are various types of life insurance policies and options to add riders for additional coverage for everyone. In India, the age limit for eligibility ranges from 18 to a maximum of 65. However, it is often easier for younger and healthier individuals, as multiple factors directly or indirectly impact the qualifying process.

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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.

Geographical location: The city or region where the policyholder resides may influence the premium due to varying risk factors.

Do's and Don't of Life Insurance Policy
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Keep these tips in mind when navigating life insurance options in India.

DO'S OF LIFE INSURANCE POLICY

DON'TS OF LIFE INSURANCE POLICY

Assess Needs: Understand your financial goals.

No False Information: Be honest, but only state facts if you’re sure. 

Compare Plans: Research before choosing.

Don’t be Hasty: Find out the claim process, premium payment, etc.

Know Policy Details: Read and ask questions.

Not Just for Tax: Focus on coverage.

Choose Right Type: Match policy to your goals.

Avoid under-insuring: Prevent financial burden in case of unexpected events. 

Honest Information: Be truthful about 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.

Add Riders: Choose relevant ones to enhance coverage and stay protected. 

Hoax Messages and Calls: Ignore messages or calls from unauthorised entities. 

Review Regularly: Update as life changes.

Supplement Employer's Cover: Get personal policy too.

How to Buy ACKO Life Insurance?
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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: This is a generic process; the exact steps can vary depending on the chosen plan and other details.

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

Businessline

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

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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

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.

What factors affect life insurance rates in India?

There are several factors that affect LI rates in India, including age, health, occupation, hobbies, lifestyle, and family history. Younger policyholders with good health and low-risk occupations typically pay lower rates than older policyholders with health problems and high-risk occupations. Policyholders who engage in risky hobbies or have a family history of health problems may also pay higher rates. Insurance companies use an underwriting process to evaluate these factors and determine the premiums to be charged.

What is the difference between term Life Insurance and Whole Life Insurance in terms of rates in India?

Term Life Insurance (TLI) policies typically have lower rates than Whole Life Insurance (WLI) policies in India. This is because TLI policies provide coverage for a specific period, usually 10 to 30 years, while WLI policies provide coverage for the policyholder's lifetime. WLI policies also have a cash value component that accumulates over time, which can increase the premiums. Additionally, WLI policies may require medical exams and health screenings, which can also increase the premiums.

How do insurance companies calculate life insurance rates for smokers versus non-smokers in India?

Insurance companies in India typically charge higher rates for smokers than non-smokers due to the increased risk of health problems associated with smoking. Smokers are more likely to develop health problems such as cancer, heart disease, and stroke, which can increase the likelihood of a claim. Insurance companies may require smokers to undergo medical exams and health screenings to evaluate their health and assess the risk of insuring them. The results of these exams are used to determine the premiums to be charged.

How much life insurance coverage do I need, and how will it affect the cost of insurance for me?

The amount of LI coverage you need in India depends on several factors, including your income, debts, and dependents. As a general rule of thumb, you should have enough coverage to replace your income for several years and pay off any outstanding debts. The amount of coverage you need will affect your rates, with higher coverage amounts typically resulting in higher premiums.

Is it cheaper to buy life insurance at a younger age?

Yes, it is typically cheaper to buy LI at a younger age. Younger policyholders are considered lower risk by insurance companies, as they are less likely to develop health problems and are less likely to die prematurely. As a result, younger policyholders typically pay lower premiums than older policyholders for the same coverage amount.

How can I get lower life insurance rates if I have a pre-existing medical condition?

If you have a pre-existing medical condition, you may be considered high-risk by insurance companies, which can result in higher premiums. However, there are several ways to get lower life insurance rates, including shopping around for quotes from multiple insurance companies, improving your overall health, etc. 

What are some common mistakes to avoid when looking for life insurance rates in India?

Some common mistakes to avoid when looking for life insurance rates in India include buying more coverage than you need, not looking around for quotes from multiple insurance companies, and not disclosing all relevant information on your application.

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.