Life insurance in India made its debut well over 100 years ago. Life insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is subject to risks of death and disability due to natural and accidental cause. Though human life cannot be valued a monetary sum could be determined based on the loss of income in future years. Hence in life insurance the Sum Assured is by way of a benefit. Life insurance Products provide a definite amount of money in case the life insured dies during the term of the policy or becomes disabled on account of accident.

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums.

Who needs Life Insurance:

Primarily who has a family to support and is an income earner needs life insurance. In view of the economic value of their contribution to the family home maker or House wives too need Life Insurance cover. Even children can be considered for life insurance in view of their future income potential being at risk.

  • How Much Life Insurance is needed.
  • The Amount of Life Insurance Required depends upon Lots of Factors….
  • How many dependents you have.
  • Whether you have any debts and mortgages.
  • The kind of lifestyle you have thought for your family.
  • Children Education requirement.
  • How much you can afford.

Kinds of Life Insurance Policies

Term Insurance :

Term insurance is a life insurance product offered by an insurance company which offers financial coverage to the policy holder for a specific time period. In case of death of the insured individual during the policy term, the death benefit is paid by the company to the beneficiary. Among life insurance plans, term insurance provides the highest life insurance coverage for the lowest premiums during the period of the plan.

In your absence, not only does your family remains financially independent, but also is able to fulfill its future needs like a young child’s higher education.

Whole Life Insurance :

With whole life Insurance you can guaranteed lifelong protection. Whole life insurance Pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death.

Endowment Policy :

An endowment Policy is essentially a life insurance policy which apart from covering the life of the insured help policy holder save regularly over a specific period of time so that He /She is able to get the lumsum amount on the maturity of Policy if the insured survives the policy term. This maturity amount can be used to meet various financial needs such as funding one's retirement, children's education and/or marriage or buying a house.

A life insurance endowment policy pays the full sum assured to the beneficiaries if the insured dies during the policy term or to the policy holder on maturity of the policy if he/she survives the term.

Thus, "any life insurance plan with a saving component and lump sum maturity benefit can be termed as an endowment plan. That can be a unit linked insurance plan (ULIP) or a non-ULIP.

Money Back Plans or Cash back Plans :

Under this plan, certain percentage of sum assured is returned to the insured person periodically as survival benefit. On the expiry of the term the balance amount is paid as maturity value. The life risk may be covered for the full sum assured during the term of the policy irrespective of the survival benefit paid.

Children policies:

These types of Policies are taken on the life of the Parent/Children for the benefit of the child.By such policy the parent can plan to get funds when the child attains various stages in life. Some insurers offer waiver of premiums in case of unfortunate death of Parent/Proposer during the term of the policy.

Annuity Plan

An annuity is a contract aimed at generating steady income during retirement, where in lump sum payment is made by an individual to obtain certain amounts immediately or at some point of future. It works as under

  • The individual begins by making a lumpsum investment in the annuity plan.
  • The annuity then makes payments to the individual on a future date or series of dates. The income can be doled out monthly, quarterly, annually or even as a lump sum payment.
  • The income payout is determined by a number of factors, including the tenure of the annuity.
  • The individual can opt to receive the income payments for the rest of his life or for a fixed period of time.
  • The income depends on whether he has opted for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of the annuity's underlying

ULIP Plan :

ULIP stands for unit linked insurance plans. ULIP is a combination of insurance and investment. Here policyholder can pay a premium monthly or annually. A small amount of the premium goes to secure life insurance and rest of the money is invested just like a mutual fund does. Policyholder goes on investing through the term of the policy – 5,10 or 15 years and accumulates the units. ULIP offers investors options that invest in equity and debt. An aggressive investor can pick equity oriented fund option whereas a conservative one can go with debt option.

In Unit Linked Insurance Plans(ULIP), the investments made are subject to risks associated with the capital markets. This investment risk in investment portfolio is borne by the policy holder. Thus, you should make your investment choice after considering your risk appetite and needs.