Life is full of uncertainties, and while we can’t control what lies ahead, we can prepare for it. That’s where a life insurance policy becomes essential. Whether you’re starting a family, buying a home, or planning your future, having the right life insurance plan offers peace of mind—not just for you, but for your loved ones too.
In this detailed yet easy-to-understand guide, we’ll explore everything about term insurance plans, term life insurance, and the different types of life insurance policy available. We’ll also discuss how to calculate your life insurance premiums and how to pick a policy that fits your lifestyle and financial goals.
Table of Contents
What Is a Life Insurance Policy?
A life insurance policy is a contract between you and an insurance provider. In exchange for regular payments called life insurance premiums, the insurer promises to pay a certain amount of money (the death benefit) to your beneficiaries if you pass away during the policy term.
Simply put, it’s a safety net for your family. It helps them cover expenses, pay off debts, or even maintain their standard of living in your absence.
What Is a Term Insurance Plan?
A term insurance plan is one of the simplest and most affordable types of life insurance policy. It provides coverage for a specific period (or “term”) such as 10, 20, or 30 years. If the policyholder passes away during this term, their family receives the agreed-upon sum assured.
Many choose a term life insurance plan because of its low cost and high coverage benefit. The focus here is purely protection, making it a smart choice for young families and individuals with financial responsibilities.
Why Choose Term Life Insurance?
Here’s why term life insurance is so popular:
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Affordable Premiums: Among all types of life insurance policy, term plans offer the lowest life insurance premiums.
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Simple to Understand: No complex returns or investment jargon—just pure life cover.
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High Coverage Amounts: Get large coverage at relatively low premiums.
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Flexible Term Options: Choose a term that aligns with your financial obligations (e.g., till your kids graduate or your home loan ends).
Also Read: What is Postal Life Insurance?
Types of Life Insurance Policy in India
When planning for your family’s financial security, understanding the types of life insurance policy available in India is crucial. Each plan serves a different purpose—from basic protection to wealth creation—depending on your life goals and responsibilities. Let’s explore the most commonly chosen types of life insurance policy that you can consider.
1. What is Term Life Insurance? Affordable Protection for a Fixed Term
A term life insurance plan is the simplest and most budget-friendly type of life insurance policy. It provides coverage for a specific time frame, such as 10, 20, or 30 years. If the policyholder passes away during this period, the nominee receives the full sum assured.
Why choose Term Life Insurance?
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Lowest life insurance premiums among all policies
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High coverage at affordable rates
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Ideal for young earners and families with limited income
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No payout if the policyholder survives the term
Best for: Pure life coverage with no investment component
2. What is Whole Life Insurance? Coverage That Lasts a Lifetime
As the name suggests, whole life insurance provides protection for your entire life, usually up to 99 or 100 years. Unlike term plans, it guarantees a payout no matter when the insured passes away.
Key Features:
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Lifelong coverage
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Higher premiums compared to term insurance
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Includes a savings element (policy acquires a cash value over time)
Best for: Long-term estate planning, leaving a legacy for heirs
3. What is Endowment Plan? Savings + Life Cover
An endowment plan is a dual-benefit policy that combines life insurance coverage with savings. A part of your life insurance premiums is allocated towards life cover, while the rest is invested. If you survive the policy term, you receive a lump-sum maturity benefit.
Why it’s popular:
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Provides a financial cushion at maturity
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Low-risk returns with guaranteed benefits
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Tax benefits under Section 80C and 10(10D)
Best for: Individuals looking for a disciplined savings habit along with insurance
4. What is Money Back Policy? Regular Income with Insurance
A money back policy is a unique type of life insurance policy that gives you periodic payouts during the policy term. These payouts are usually a percentage of the sum assured and continue until the policy matures.
What makes it different?
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Regular survival benefits throughout the term
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Final lump sum payment at maturity
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Death benefit is paid in full, regardless of prior payouts
Best for: Individuals who want periodic returns along with life coverage
Also Read: What is Group Life Insurance?
5. What is Unit Linked Insurance Plan? ULIP Insurance Meets Investment
A Unit Linked Insurance Plan (ULIP) is a market-linked product that combines investment with life insurance. A part of your premium goes toward providing life cover, and the rest is invested in equity, debt, or hybrid funds, based on your risk appetite.
Why people choose ULIPs:
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Dual benefit of insurance and wealth creation
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Flexibility to switch funds based on market performance
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Transparent charges and fund value tracking
Best for: Investors with long-term financial goals like retirement or children’s education
6. What is Child Insurance Plans? Secure Your Child’s Future
Child insurance plans are specially designed to support your child’s future milestones—like higher education or marriage—even in your absence. These plans ensure a financial corpus is available when your child needs it the most.
Highlights of Child Insurance Plans:
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Maturity benefits aligned with educational milestones
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Waiver of premium benefit (policy continues even if the parent dies)
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Optional riders for enhanced protection
Best for: Parents who want to build a financial safety net for their children
How to Choose the Right Life Insurance Plan?
Choosing the right life insurance plan depends on your life stage, financial goals, and income. Here’s a simple checklist:
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Assess your needs: Do you need just protection or a mix of investment and insurance?
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Duration of coverage: For how long do you need coverage?
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Budget: Can you comfortably pay the life insurance premiums?
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Dependents: How many people depend on your income?
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Liabilities: Home loan? Car loan? Education loan?
If you’re looking purely for protection and affordable life insurance premiums, a term insurance plan might be the best fit.
Life Insurance Premiums: What Affects Your Cost?
Your life insurance premiums aren’t just picked randomly. They’re based on several factors:
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Age: The younger you are, the lower the premium.
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Health: Smokers or people with medical conditions pay higher life insurance premiums.
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Occupation: Risky jobs (like mining or aviation) might increase your cost.
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Coverage amount: Higher coverage = higher premium.
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Policy term: Longer-term policies usually have higher life insurance premiums.
Always compare plans and choose one that offers the best value for your money.
Also Read: What is Term Life Insurance?
Benefits of Having a Life Insurance Policy
Having a life insurance policy isn’t just about preparing for the worst—it’s about living with peace of mind. Here’s how it helps:
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Financial Protection: It replaces lost income and ensures your family doesn’t suffer financially.
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Debt Repayment: Helps pay off loans or EMIs.
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Wealth Creation: Some types of life insurance policy double up as savings or investment plans.
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Tax Benefits: Life insurance premiums are eligible for tax deductions under Section 80C.
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Peace of Mind: Knowing your loved ones are secure is priceless.
Common Myths About Term Insurance Plans
There are many myths around term life insurance, and it’s time to clear them up.
Myth 1: Term insurance is a waste if I survive the term.
Fact: You’re buying peace of mind. Plus, some term plans now offer return of premium.
Myth 2: Only breadwinners need life insurance.
Fact: Homemakers also contribute to the family and should be covered under a life insurance plan.
Myth 3: Employer insurance is enough.
Fact: Employer coverage is often minimal. You need a personal term insurance plan for better protection.
How to Calculate Your Life Insurance Premiums
Use online life insurance calculators to get an idea of your life insurance premiums. Here’s what you’ll need to enter:
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Age
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Annual income
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Policy term
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Desired sum assured
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Smoking habits
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Medical history
The calculator instantly shows you premium estimates across multiple insurers, helping you choose wisely.
How Much Life Insurance Coverage Do You Need?
A good rule of thumb is 10 to 15 times your annual income. But this can vary depending on:
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Number of dependents
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Loans and debts
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Future expenses like education or weddings
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Existing savings
So if you earn ₹10 lakhs annually, aim for a coverage of ₹1–1.5 crore under your term life insurance.
Best Time to Buy a Term Insurance Plan
The sooner, the better. Buying a term insurance plan when you’re young helps lock in lower life insurance premiums for the entire policy term. Even if you’re in your 20s, it’s the perfect time to secure your future.
Also Read: What is Postal Life Insurance Tax Benefit?
Buying Life Insurance Online vs Offline
Today, most people buy a life insurance policy online—and for good reason.
Online
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Lower life insurance premiums
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Instant policy issuance
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Easy comparison of plans
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No paperwork
Offline
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In-person guidance
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Better for those not comfortable online
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Ideal for complex types of life insurance policy
Pick whichever method suits you, but ensure you understand the policy before signing.
Riders You Can Add to Your Life Insurance Policy
Riders are add-ons that enhance your life insurance plan. You can customize your plan with:
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Critical Illness Rider
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Accidental Death Benefit
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Waiver of Premium
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Income Benefit Rider
These may slightly increase your life insurance premiums, but the added protection is often worth it.
Key Things to Remember While Buying a Life Insurance Policy
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Read the fine print: Know what’s covered and what’s not.
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Check the claim settlement ratio: A high ratio means better chances of payout.
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Disclose all facts: Don’t hide medical or smoking history.
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Review your plan regularly: Update it as your life changes.
Conclusion: Secure Your Family’s Future with the Right Life Insurance Plan
A well-chosen life insurance policy is one of the wisest financial decisions you’ll ever make. Whether it’s a simple term insurance plan or an investment-backed policy, the goal is the same—to protect the people you love.
Start today. Compare the different types of life insurance policy, calculate your life insurance premiums, and make a choice that gives you—and your family—the future they deserve.
Also Read: Postal Life Insurance For Government Employees
Life Insurance Policy FAQ’s
1. What is a life insurance policy?
A life insurance policy is a financial agreement between you and an insurance company. You pay regular premiums, and in return, the company provides a lump-sum payment (called the sum assured) to your family if you pass away during the policy term. It offers financial protection and peace of mind.
2. What is a term insurance plan and how does it work?
A term insurance plan provides life coverage for a specific number of years (term). If the policyholder dies during this period, their nominee receives the death benefit. It’s a pure protection plan with no maturity or survival benefits but comes with low premiums and high coverage.
3. What is the difference between term life insurance and whole life insurance?
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Term Life Insurance: Covers you for a fixed term (e.g., 10, 20, or 30 years) with lower premiums and no savings benefit.
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Whole Life Insurance: Offers lifelong coverage along with a savings/investment component, but with higher premiums.
4. How do I choose the right life insurance plan for my needs?
To choose the right life insurance plan, consider:
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Your age and health
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Number of dependents
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Outstanding loans or liabilities
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Income and lifestyle
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Long-term financial goals
Use comparison tools, consult a financial advisor if needed, and select a policy that offers the right balance of coverage and affordability.
5. How are life insurance premiums calculated?
Life insurance premiums are calculated based on several factors:
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Age and gender
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Smoking or drinking habits
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Medical history
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Sum assured (coverage amount)
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Policy term
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Occupation risk level
You can use online premium calculators for a quick estimate.
6. What are the different types of life insurance policy available in India?
Common types of life insurance policy include:
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Term Life Insurance
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Whole Life Insurance
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Endowment Plans
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ULIPs (Unit Linked Insurance Plans)
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Money Back Policies
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Child Insurance Plans Each serves different financial goals—protection, savings, or investment.
7. What happens if I stop paying my life insurance premiums?
If you stop paying your life insurance premiums, your policy may lapse, and your coverage will end. Some policies offer a grace period or allow policy revival within a specific time, but you may have to pay late fees or interest.
8. Is it better to buy life insurance online or offline?
Buying life insurance online is often more convenient and cost-effective:
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Lower life insurance premiums
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Easy comparisons
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Instant policy issuance
However, offline buying is better if you need personal assistance or have complex needs. Both options are valid—choose what suits you best.
9. Can I add riders to my term life insurance?
Yes, you can add riders to your term life insurance for enhanced protection. Popular riders include:
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Critical illness rider
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Accidental death benefit
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Waiver of premium
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Income benefit rider
These come at an extra cost but offer additional coverage.
10. Is term insurance a good investment?
Term insurance is not an investment—it’s a protection tool. It offers high coverage at low premiums, making it ideal for securing your family’s financial future. If you want returns, explore types of life insurance policy like endowment or ULIP plans.
