Life Insurance

Death is unavoidable, but its timing is uncertain. So, if you are earning for your family, it is important to insure your life against death. Premature death can cause financial loss for your family. Also, if you have yet to plan for retirement, living too long can strain your finances. You should know and understand life insurance plans and policies in India to get the benefit when needed.

Table of Contents

What is Life insurance?

Life Insurance is a contract between an insurance policy holder or individual and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death or disability of an insured person or after a set period. Opting for a life insurance policy can protect the policyholder’s family from financial strain in an unfortunate event. When the family’s primary breadwinner passes away unexpectedly or becomes permanently disabled, life insurance protects the family financially.

Why buying Life insurance plan is so important?

Life insurance helps you attain financial security, ensuring your family members are unaffected. Life insurance also offers tax benefits on the premiums that a policyholder pays for their life insurance income tax under 80C. Moreover, life insurance plans come at affordable prices, and the policyholder can purchase additional benefits by purchasing a rider to enhance their life cover.

To get more clarity, look at the reasons given below.

  • Financial Security: The primary benefit of a life insurance policy is that it provides long time financial support to the policyholder’s family in case of any unfortunate event with the policyholder.
  • Death Benefit: In case of any unfortunate event with the policyholder, the Insurance company provides financial protection in the form of a death payout. The registered nominee receives the entire sum assured plus the bonus accumulated over time.
  • Maturity Benefits: Some insurance policies offer a maturity profit at the end of the policy term if the life assured has survived the whole policy tenure. The maturity profit below an insurance policy helps individuals meet their money goals throughout their time.
  • Guaranteed Returns: Some life insurance plans give you Guaranteed Returns after a specific term. That helps you get your dream come true, such as a child’s higher education, your son or daughter’s marriage, building your dream house, and other expenses.
  • Wealth Creation: Life insurance Savings cum investment plans such as endowment plans, ULIPs, and Moneyback plan these plans provide you with Both Investment Plans and life insurance.
  • Tax Benefits: Life insurance premiums are eligible for a tax deduction of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act 1961. Also, the payout received from an insurer is exempt from tax u/s 10(10D) of the Income Tax Act, and the premium amount paid for riders such as critical illness claimed under section 80D
  • Riders: Riders such as accidental death benefits, Premium waiver benefits, critical illness, Terminal illness riders, daily hospital cash benefits, Surgical care rider benefits, accidental disability riders, and Income benefits are add-ons to your current Core life insurance plan, which help customize the policy according to your specific needs.
  • Flexible premium payment option: Insurance holders can choose the frequency of premium payments per their needs, like monthly, quarterly, half-yearly, or yearly.
  • Retirement Planning: Some Life insurance Plans give a monthly pension to the policyholder plan for their retirement.
  • Loan Facility: Some life insurance Plans offer loans against the policy feature, which can help an individual fulfill urgent financial requirements such as treatment for medical emergencies or help an individual fulfill financial obligations that cannot be avoided.
  • Long-Term Savings: Life insurance is a long-term savings product. It also ensures that insurance holders focus on long-term returns rather than risky investment decisions that could provide short-term profits.
  • Investment Options: Life insurance provides financial protection to beneficiaries or through investment options like ULIPS, endowments, etc., that are used for Long term investment.

What benefits will you get from buying Life insurance online?

If you need clarification about whether you should buy a Life insurance policy online or offline, then look at the benefits you will get while buying it online.

  • Plenty of options: – While taking Life insurance online, you will get plenty of options in a single place. You can travel to the offices of different companies or agents. You have to open your mobile, laptop, or tablet, whatever you have, and search for the best life insurance policy providers. After checking all the facilities, they are providing. You can buy the best policy which suits your conditions.
  • Easy to compare: – As you get the list of all life insurance provider agencies in one place and their services, you can compare them easily and buy the best policy that fits your requirements. 
  • No mediators or agents: – because of online life insurance, there is no need for agents anymore. Companies sell their policies directly to the customers. Online makes the process faster. The policy cost also decreases, as the company does not have to pay any agent to sell their policies, and the number of paperwork also decreases, again reducing the premium cost.
  • Transparency: – When buying Life insurance online, companies provide detailed terms and conditions on their website. Even top insurance broker websites like provide policies for many companies. So you can visit only a few websites. On a single website, you can compare them all. As no mediator is involved, no information is hidden from customers for selling a particular policy. So, you can buy a policy only after comparing all the companies and getting all the information.
  • Online Reviews: -Company websites provide reviews of their current policyholders. This can help you to get the right fit policy according to your requirements. While buying a policy offline, you cannot get this information, as you cannot visit all the policyholders physically.
  • Full clarity about the policy: – here, you will get full information about the policy you are going to purchase. No agent is there to hide the information from you to sell the policy. Already existing customers’ reviews also help you to make the right decision. If unsatisfied, many policy providers have live chat facilities on their websites, where you can clear all your doubts by talking to customer support.
  • Advance Insurance quote: – After filling in some details like your age, name and bad habit and education, etc., on the website. The company will instantly send you a life insurance quote, which contains details about coverage and the premium you have to pay. You can buy the policy only if you are satisfied completely with all the conditions.
  • Less time taking: – As you do not have to go anywhere while buying the policy, paying the premium, or getting any information, it is much less time-consuming than offline policy buying.
  • More convenient: -It is more convenient to buy the policy online than to buy it offline because here, you can inquire anywhere in your comfort zone and whenever you are free. There is no time bound.
  • Information available 24X7: – All the required information is available 24/7. You can get all information at any time, as you do not have to visit there physically.
  • Low premium: -There is no need for any agent, so no commission has to be given to them. Also, less paperwork is needed, and the company saves on postal charges and other office expenses while selling policies online. So, the premium amount also reduces while purchasing Life insurance online.
  • Discounts: – Many companies give discounts to customers who buy life insurance online from their website. This also allows you to buy the same policy with a lower premium value.
  • Instant policy activation: -Here, you will activate your policy instantly after filling in some details on the company’s website. You do not have to wait for processing for long.
  • Safe Transaction: -If you are getting second thoughts on whether to buy online due to the security threat in an online transaction, then do not worry. Here your money is completely safe. You have to do only one thing: check whether the company is approved by IRDAI (Insurance Regulatory and Development Authority of India) or not.IRDA registers the company which is safe and has saved transaction modes. 
  • Pre and post-sell service: – When you buy a Life policy online, the company provides you with a premium calculator by which you can calculate the premium amount you have to pay. Again, after buying, the company will send the premium receipt, soft copy of the policy bond, and premium renewal reminder online.
  • No geographical limitation: – As you do not have to visit the office, the company’s location does not affect your purchase. You can buy a Life insurance policy from any company present in any geographical location.

Why should you compare life insurance online?

It would help if you had an idea about why you should buy life insurance online. Because it is more convenient, you will get more options, reduce the premium, and many more benefits. Now, let us know about it in detail.

1. It is easy and convenient: – Comparing life insurance online is very easy. Because you have to search on Google, you will get a list of all the insurance companies available. Then you can check all your requirements, compare them and finally take the best policy according to your requirement.

Again comparing life insurance online is convenient. Because you do not have to go anywhere, you can check the authenticity of the companies and compare them in the comfort of your home. Hence it is also less time taking.

2. It is free, and you can do it anytime: – You do not have to spend a single penny to compare life insurance online. Because you do not have to go anywhere for this, also, you can do it any time, as you can search for all the companies just sitting at your home.

3. To get a better and more affordable premium: – You can compare more companies while comparing them online. Hence, you can get better life policies compared to offline policies. Again, while comparing the different policies, no agent is involved. So, expenses related to the agent will be reduced. Also other paperwork-related expenses will also be reduced. Hence, the overall premium the amount that will decrease. 

4. To get the required plan: – While comparing the life policy online, you will get all the information about the policy. So, according to your requirement, you can buy the right policy. While searching offline, you can only do this if you get these many options to compare.

5. To get additional benefits: – When your compare the life policies online, no points will be left out. You may know about some benefits as compared to offline.

6. To make a more informed decision: – While comparing life insurance online, you can make a more informed decision as you are getting all about the terms and conditions.

7. To take the right add-ons: – During the online comparison, you will learn about all the add-ons the companies provide. So you can choose the right add-ons which are required for you. Hence, you can save yourself from unnecessary expenses.

7 Key Factors To Consider While Buying Life Insurance Policy

Here are some key factors you should consider to understand your Life Insurance requirement and make the right decision while buying a Life Insurance Policy. Here are some important points to consider

1. Know your current life stage

As you grow older, you will pass through different life stages. Some of these life stages are getting your first job, your marriage, the birth of your child, their teenage years, your daughter’s or son’s marriage, and your retirement. At these different life stages, you will have different Planning for these goals in advance will help you achieve them.

2. Choosing the right insurance amount: – It is most important to choose the right plan with the best premium. Keep your premium amount manageable by compromising on coverage. Because, by doing this, you may not get total benefit in critical situations and may have to pay a significant amount while treating a disease, hence no benefit of purchasing life insurance.

3. Claim Process: – You must check the claim process before buying a life insurance policy. The simpler the Process, the faster you can pass your claim. So, buying a policy with a simpler claim process is better.

4. Claim Settlement Ratio:- This is the percentage of the total claims received during the financial year the life insurance provider has settled.

5. The add-on riders:- Riders such as accidental death benefits, Premium waiver benefits, critical illness, Terminal illness riders, daily hospital cash benefits, Surgical care rider benefits, accidental disability riders, and Income benefits are add-ons to your current Core life insurance plan, which help customize the policy according to your specific needs.

6. The type of policy:- There are various life insurance policies, each with unique advantages. You must identify your needs and goals and choose the policy type that best meets your requirements. For example, If you want only insurance, then you can choose Term Insurance, or if you want insurance and investment, then you can go for ULIPs and Endowment insurance

7. The terms and conditions of the policy:- There are other terms and conditions of a life insurance policy that you need to consider as a policyholder.

Why should you buy life insurance at an early age?

Low premium: – When you buy life insurance, you have to pay less. With growing age, the premium amount also increases. For example, if you buy a life policy at 25 years of age, you will have to pay a premium of Rs. 5000. At 35 years, you will have to pay Rs. 6000. At 45 years of age, you have to pay Rs. 8000 and so on. So, buying a life insurance policy at an early age is affordable.

Tax benefit: – By taking life insurance at an early age, you can get a tax deduction on your income for a longer period under section 80C of the Income Tax Act, 1961. 

Better financial Planning: – As you get high coverage, when you buy life insurance early, you can invest the remaining money in other long-term investments. Again, at an early age, as you have to pay less premium, you will be left with more money to invest in other valuable things.

Benefits for Family Members:- In the unfortunate event of your life, your family and kids will find it harder to cope without financial security. Buying a life insurance plan early age can give your dependents this advantage.

Life insurance add-ons or riders

These are the extra benefits that are not present in the original life insurance plan, and to get those benefits, you have to pay some extra with your basic premium amount. It is profitable for you. Because with some extra charges, you can get desired additional coverage in your original plan. 

Let us see what the benefits of life insurance riders are: –

Accidental Death Benefit:- Accidental Death benefit rider provides a sum assured amount in case of any unfortunate demise of the life assured in an accident. This rider is the most popular opted rider in the life insurance plan.

Premium Waiver Benefit:- the Waiver of premium rider waives off all future premiums payable under the life insurance policy in the case of the policyholder’s death, disability, or diagnosis of a critical illness.

Critical illness:- Waiver of premium rider waives off all future premiums payable under the life insurance policy in the case of the policyholder’s death, disability, or diagnosis of a critical you must add this add-on to your Life insurance.

Accidental Disability Rider:- Under the accidental total permanent disability rider, a benefit is payable to the life assured if policyholders cannot earn money.

Income Benefits:- income benefit rider provides several monthly instalments equivalent to the policyholder’s monthly income in case of their unfortunate death. This rider helps the policyholder’s family maintain the standard of living.

What are the Different Types of Life Insurance plans ?

(i) Term Life Insurance Plans – Pure risk covers

(ii) Unit-linked insurance plan (ULIP) – Insurance as well as Investment opportunities

(iii) Endowment Plan – Insurance and Savings

(iv) Money-Back – Periodic returns alongside insurance cover

(v) Whole Life Insurance – Whole life coverage to the life assured

(vi) Child’s Plan – For achieving your child’s life goals like education and marriage

(vii) Retirement Plan – Post-retirement income

Term Life Insurance:

Features and benefits of term life insurance plans are:

  • For term life insurance policies, the policyholders can avail the lump sum only if the policyholder dies during the policy tenure.
  • Life insurance insurers in India generally provide term life insurance policies for tenures of 10 or 20 or 30 or 40 years.
  • Lowest Premium and High Coverage but only if the Policyholder’s Death during the policy tenure.
  • A term policy is suitable for insurance buyer who do not expect to get a return for the entire premium payment after maturity.

Best Term Life Insurance Plans

Endowment Insurance Plans

Features and benefits of Endowment Insurance Plans are:

  • Sum assured in an endowment policy is payable either on survival to the policy duration or on death within the term
  • Endowment policies come “with Profit’ and ‘Without Profit’ plans
  • Endowment policies come with tax benefits.
  • Endowment policies enable long-term savings.

ULIP Plans

Features and benefits of ULIP insurance plans are

  • Unit Linked Insurance Plans ULIP is a life insurance policy specially designed for wealth creation and life protection, thus, offering the dual benefits of investment-cum-insurance.
  • ULIPs generally provide life cover that is 10x times the annual premium payment.
  • Policyholders qualify for tax benefits under Sections 80C, 80CCC and 10(10D) of the Income Tax Act, 1961.
  • ULIPs are tailor-made to meet the long-term financial goals of insurance holders like a child’s higher education and marriage, retirement plans, etc.

Whole Life Plan

A whole life insurance policy or permanent life insurance provides life coverage until the death of the policyholder. The policy stays its life as long as the policyholder pays the premium. 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 of the policyholder. The maturity age of whole life insurance is 100 years. If the policyholder dies before the age of 100 years, the nominee receives the sum assured.

How Much Life Insurance Do You Need?

The amount of Life Insurance coverage you need will depend on many factors such as:

  • How many dependents do you have
  • What kind of lifestyle do you want to provide for your family
  • How much you need for your children’s education
  • What your investment needs are
  • What are your affordability

Tax benefits on life insurance

Section 80C of the Income Tax Act Deduction: If you are paying a premium for your life insurance policy or for the life of your parents, children, or spouse, you will qualify for a deduction under Section 80C of the Income Tax Act. However, in order to be able to claim the said deduction, the premium value must not be more than 10% of the sum assured amount, in case the policy was issued after 1 April 2012.

Section 10(10D) Maturity Deduction: If the premium amount does not surpass 10% of the sum assured for plans that have been issued post 1 April 2012 and 20% of the sum assured for plans that have been issued before 1 April 2012, then the maturity amount that the policyholders receive at the end of the policy term will be completely exempt from tax as per Section 10(10D) of the ITA 

Documents required for buying life insurance

Here is the list of documents you require to submit while buying a life insurance policy

Income Proof

  • Salary slips for the last 6 months
  • Bank statements of the last 6 months with entries of 3 months of salary credited continuously
  • Income Tax Returns (ITR) for the last 2 years
  • Certificate issued by CA in case the individual is self-employed
  • Form 16 (Latest)

Age Proof

  • Birth Certificate
  • Aadhaar Card
  • Voter ID Card
  • PAN Card
  • Passport
  • Driving Licence
  • Marriage Certificate
  • Ration Card

Identity Proof

  • Aadhaar Card
  • Passport
  • PAN Card
  • Voter ID Card
  • Address Proof
  • Passport
  • Aadhaar Card
  • Voter ID Card
  • Ration Card
  • Driving Licence
  • Passbook with 6 months of latest entries
  • Bank statement of savings account
  • Latest 3 months of utility bills

Other Documents

  • Apart from KYC documents, a few other documents are required at the time of applying for a life insurance policy. Following is the list of other documents required at the time of policy application:
  • Application/Proposal Form
  • Policy Declaration in case the life insured had not filled the proposal form.
  • Apart from all these, some insurers may ask for other documents according to their requirements.

Life Insurance claim

Death Claim

The below documents would be required:

  • filled claim form
  • Death certificate
  • Identity proof of beneficiary/beneficiaries
  • Age proof of the policyholder
  • Life insurance policy details
  • Assignment deeds
  • Legal evidence of title in case the policy is not nominated
  • Medical reports and doctor’s certificate
  • Post-mortem report
  • Police inquiry report

Maturity Claim

  • filled claim form
  • Identity proof of policyholder
  • Age proof of the policyholder
  • Life insurance policy details

The insurance providers would investigate the genuineness of the claim and respond about the settlement. In case of incomplete documentation, the insurance company would raise a requirement and inform the policyholder’s nominee.

H3. Frequently Asked Questions (FAQs)

Q. Is buying a life insurance policy essential?

A. If you have dependents as well as enough assets to provide a better life for them after your death, then you may not need life insurance, but if you have dependents with not enough money, then you must need life insurance.

Q. Is there any tax benefit with Life Insurance Plans?

A: Yes, The life insurance tax benefits come under Section 80C of the Income Tax Act of 1961. You can claim tax benefits maximum deduction of Rs 1,50,000 per year against the premiums paid for the life insurance policy. The tax-saving life insurance plans include policies for yourself, your spouse and dependent children.

Q. What are the different types of life insurance available in India?

A: Here are the different types of life insurance plans and their benefits, so you can pick the most suitable one:
(i) Term Life Insurance Plans – Pure risk covers
(ii) Unit-linked insurance plan (ULIP) – Insurance as well as Investment opportunities
(iii) Endowment Plan – Insurance and Savings
(iv) Money-Back – Periodic returns alongside insurance cover
(v) Whole Life Insurance – Whole life coverage to the life assured
(vi) Child’s Plan – For achieving your child’s life goals like education and marriage
(vii) Retirement Plan – Post-retirement income

Q. Who is a Nominee?

A: A nominee is a person who chooses by the policyholder and can be anyone to whom the policyholder wants the financial benefits to accrue in case of his/her death during the policy tenure. 

Q. Can I add multiple nominees to my policy?

A: Yes. you can add nominees than one, the policy money will be payable to them jointly or to the survivor(s) of them.

Q. Can I divide my policy amount between nominees?

A: Yes, The policyholder can choose more than one nominee for his/her life insurance policy. In the case of multiple nominees, the policyholder divides the share of the total amount between multiple nominees.

Q. how much life insurance do I need?

A: A common rule of thumb for determining how much life insurance you need is multiplying your salary by ten to fifteen. When looking for life insurance, remember how much debt you have and how many family members depend on you.

Q. What is the age limit for term life insurance?

A: Term insurance age limit refers to the age at which you can buy a term insurance plan. Minimum age 18 years and maximum 65 years.

Q. How to claim life insurance after the death of a life insurance policyholder?

A: You must inform the insurance company about the policyholder’s death to process your claim quickly. After being informed, you must intimate the claim form with supporting documents.

Q. What is the meaning of the rule of thumb for a life insurance policy?

A: The life insurance rule tells you that you should have a life cover at least 10 times your current income. It should factor in all your liabilities or loans also. This rule indicates how much income your family will need to survive and manage their day-to-day expenses if you are not around.

Q. Can I cash my life insurance policy before death?

A: Yes, You can cash out of your life insurance policy. Surrender an insurance policy and the insurance company will return you the policy’s cash value, less some fees, and cancel the policy.

Q. How can I revive a lapsed life insurance policy?

A: A policy can be revived by paying the past premiums and additional charges collected by the insurer.

Q. Who would get the sum assured if the nominee died before the policyholder?

A: The life assured has the option to change the nomination. And, if the nominee dies after the demise of the life assured, but before getting the claim payout, the payout would be paid to the legal heirs. To reduce the stress and disputes in the family, the best way is to update the nomination when needed.

Q: What happens to your policy if you don’t die?

A: If the policyholder survives the entire policy term, then the premium paid towards the policy is paid back to the policyholder in the form of a maturity benefit. Additional benefits are also included in the total sum assured if any.

Q: Can Premiums be Tax deductible?

A: Yes, the premium paid towards the policy is tax-exempt up to a maximum limit of Rs 1.5 lakh in a financial year under section 80C of the Income Tax Act,1961.

Q: What is the maximum age for a life insurance policy?

A: Since the maximum age for this insurance policy is set by the insurance company, There Isn’t a universal age limit. The general maximum age limit set by life insurance companies falls somewhere between 75 years and 80 years.

Q: Do Life insurance offer a grace period?

A: Yes, The life insurance policy offers a grace period of 30 days in case the policyholder misses their premium payment date.

Q: What will happen to the life insurance benefit if the policyholder and nominee die?

A: In such a scenario, where both policyholder and nominee died, then the benefits payable to the legal heir

Q: Can I get maturity benefits in term insurance if I survive the policy tenure?

A: No, In term life insurance policies, the policyholders can get the lump sum only if the policyholder dies during the policy tenure. Term insurance does not provide any maturity benefits.

Q: Does life insurance cover accidental death?

A: Yes, life insurance covers accidental death

Q: What is the most cost-effective life insurance plan?

A: A term plan is the cheapest type of life insurance since it does not include any survival benefits. When the policy period ends, the plan lapses.

Q: I have a life insurance cover of 20 lakhs. Is it enough?

A: The thumb rule for choosing the right coverage is getting the cover of 10-15 times your annual income. Therefore, analyze your requirements and decide on your ideal life insurance coverage.

Q: Who can claim a life insurance policy after the policyholder’s death?

A: After the insured person’s death, their nominee or legal heir can file a claim.

Q: How many life insurance policies can a person buy?

A: There is no limit to the number of life insurance plans that one can buy as long as they can pay the premium. The insurance company will assess the policyholder’s ability to pay. Premiums and their health status before forwarding their request for multiple plans.

Q: Can I return my insurance policy immediately after I purchase it?

A: If you don’t like the insurer’s terms and conditions, you can easily return within 15 days (30 days for online policy) from the policy purchase date.

Q: Who decides the life insurance premium?

A: Underwriters play an important role while determining the premium for your life insurance policy. The underwriters assess your application and decide the premium for your life insurance policy.

Q: Is it safe to buy a life insurance policy online?

A: In online, Purchasing a life insurance policy is easy, safe, quick and hassle-free, and payment is made through a safe gateway.