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Life Insurance Policy Types And Who Are They Suitable For

Life Insurance Policy Types And Who Are They Suitable For

According to experts, our financial planning is incomplete without a life insurance plan. An insurance policy protects the economic well-being of dependant family members in the case of an unforeseen incidence that results in the policyholder’s untimely death.

However, many people are surprised to learn that there are diverse types of life insurance plans—each with its unique benefits to the policyholder. Let us look at the many forms of life insurance policies in India and how they impact your financial health.

Types of Life Insurance Plans in India

Choosing and applying for the right life insurance policy can be a challenging, overwhelming experience. The good news is that there are many options out there for you to choose from! Here’s a list of some life insurance policies and what they each offer.

Term Life Plans

A term insurance policy is the most basic type of life insurance. It is simple to understand, provides extensive coverage, and is inexpensive to purchase. A term insurance policy covers the risk of death for a set period. In the event of the insured’s untimely death within the policy period, the insurer pays the sum assured to the beneficiary.

To make the plan more extensive, a policyholder can also add life insurance riders at an additional premium. Here, the premium can be paid either in:

  • Lumpsum
  • Monthly,
  • Or a mix of two

Although term plans offer no maturity benefits, some companies now provide Term Plans with Return of Premiums or TROPs. The premium amount is returned if the policyholder outlives the policy term.

Whole Life Plans

As the name implies, whole life insurance protects the insured for the rest of their life or until the age of 100. If the insured person dies during this period due to an unforeseeable incident, the sum assured agreed to at the time of policy purchase is paid to the beneficiary, along with any bonus. However, if the insured outlives his policy term, he is entitled to the policy’s maturity benefits.

PlansPolicy tenure
Whole Life PlansWhole life or 100 years
Term PlansFor -10, 15, 20 years


Individuals who seek a single policy for both investing and insurance may consider ULIPs. ULIPs are a combination of two essential products that offer life insurance and the opportunity to build wealth through market-linked returns.

ULIPs feature a 5-year lock-in phase and allow you to invest in a wide range of fund selections based on your risk tolerance. ULIPs also allow for partial withdrawal and fund changes. Furthermore, under the IT Act, the maturity amount is tax-free.

Endowment Plans

Endowment plans are life insurance that serves as insurance and a savings product for the policyholder. Endowment plans are suited for those who want maximum coverage as well as a significant savings component. These plans help the insured accumulate a sizable corpus to meet different life goals while also offering financial stability to their families. These plans are roughly grouped into two types:

  • with profit and
  • without profit

Group Life Insurance

A group insurance policy protects a group of individuals under a single plan. Here, life insurance benefits are extended to all the persons included under the plan. An organization may offer such a plan to eligible employees as part of employee benefit incentives. It is vital to highlight that you will be covered under the group plans as long as you work for the company. If you leave the organization, your cover ends.

Child Insurance Plans

Child plans allow you to create a corpus to meet your children’s future financial demands, such as higher education or marriage. It is a type of investment and insurance plan that aids in generating wealth for future commitments. In the event of the policyholder’s untimely death within the policy term, the beneficiary receives the lump sum payment. Companies provide different types of life insurance policies. However, before selecting a specific insurance plan, it is critical to understand how life insurance works and the various benefits the plan provides to your family.

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