A contract between an individual and an insurance company where the insurer promises to pay a designated beneficiary a sum of money upon the insured’s death. It Provides financial security for dependents, covers liabilities, and ensures long-term wealth planning.
Major Types of Life Insurance Policies
| Policy Type | Key Features | Best For |
| Term Insurance | Pure protection plan; low premiums; high coverage; pays only on death. | Families needing maximum protection at minimal cost. |
| Endowment Plan | Combines insurance + savings; pays lump sum on maturity or death. | Those wanting disciplined savings with protection. |
| Unit Linked Insurance Plan (ULIP) | Market-linked investment + insurance; flexible fund options. | Investors seeking growth with protection. |
| Money-Back Policy | Periodic payouts during policy term + death benefit. | People needing liquidity at intervals. |
| Child Insurance Plan | Ensures funds for child’s education/marriage; maturity benefits. | Parents planning for children’s future. |
| Retirement/Pension Plan | Provides regular income post-retirement; annuity options. | Individuals planning retirement security. |
| Whole Life Insurance | Coverage for entire lifetime; wealth transfer tool. | Estate planning and legacy building. |
Benefits of Life Insurance
- Financial Protection: Ensures dependents are not burdened by debt or loss of income.
- Wealth Creation: Certain policies (ULIPs, endowment) help build savings/investments.
- Tax Benefits: Premiums qualify for deductions under Section 80C; payouts may be tax-free under Section 10(10D) in India.
- Goal-Based Planning: Policies can be tailored for education, retirement, or estate planning.
- Peace of Mind: Provides security against uncertainties.
Things to Keep in Mind
- Term insurance is the most cost-effective for pure protection.
- ULIPs carry market risk — suitable only for those with higher risk appetite.
- Endowment and money-back plans offer guaranteed returns but lower compared to market-linked products.
- Always check claim settlement ratio of insurers before buying.
- Ensure the sum assured is at least 10–15 times your annual income for adequate coverage.
Life insurance is not just about protection — it’s a multi-purpose financial tool that can secure your family, help achieve long-term goals, and provide peace of mind.