Life is riddled with uncertainties. Anything can happen at any time. Keeping that thing in mind, people go for various insurance policies available in the market. When someone gets a cover of life insurance then a fixed amount of money is paid to him or his beneficiary at the end of its term or after his death. People go for various life insurance products to save for old age, fund children's education and marriages, and also for saving taxes.
Most life insurance policies also provide tax benefits under various sections of the Indian Income Tax Act. Insurance policy holders pay a monthly, quarterly or annual premium to insurance companies. When individuals die or when the policy has reached maturity, a pre-determined amount is paid to the policy holder or the dependents as nominated by them.
Insurance companies collect premiums from a large number of people. Only a few of these insured people may actually suffer the loss. Thus insurance companies invest the money they collect and end up making money.

Types of life Insurance

Endowment
If you go for an endowment policy then a lump sum is paid after a specified term or on earlier death of the insured. This is a long-term life insurance that helps in saving money regularly along with cover for live. It also benefits the insured with bonuses over time.
If someone goes for a policy term then the nominee gets the death benefit of the sum assured along with the accumulated bonuses up to that point. In the case of survival, the policyholder gets a survival benefit, along with bonuses. The maturity period of an endowment policy is after 10, 15 or 20 years up to a certain age limit. Some of endowment policies also pay in case of critical illness.
Endowment insurance policies are popular due to serving as both investment and coverage.
Children's Plan
Children’s Plan is a type of life insurance policy that helps a person in sharing expenses for his children in future. Due to increasing cost of higher education in India, and also due to cost of daughter’s marriage in middle-class people many people go for Children’s Plan. The plan secures future of children in terms of expenses.
Many insurance companies offer money back policy that ensures that you are given a defined payout at a defined period for the need of the children. In this type of policy the money is clearly earmarked for the use of the child at a target date for a particular purpose, whether it is education or marriage. In case of demise of the parents the child is given the sum assured on maturity and also the interim premiums are waived off.
Money Back
Money Back is a great type of life insurance policy, as it gives you life security as well as a regular income. You can save money, cover your life, save taxes and also get a regular income.
If you get a cover of Money Back policy then you will keep getting a percentage of the sum assured during lifetime of the insurance policy. If the insurer survives then he will get the remaining amount of corpus bonus. If the ensured dies before the full term then the nominee gets the full sum assured. He also gets additional benefits.
Pension Plan
Pension planning is important for those people who are not rich. They need to go for Pension Plan, a type of life insurance where they are assured a certain amount of regular income to fulfill their daily needs. This type of plan also covers your life besides ensuring a regular income after retirement. Insurance companies offer two kinds of Pension Plan. One is endowment and another is unit linked.
Some insurance companies bundle pension planning along with term insurance. However, it is important to do your research about your needs. It is advisable to go for a pension plan that gives out the maximum maturity value.
Term Insurance
If you want no other benefit but just cover for life, then you should go for a term insurance. It is the purest form of life insurance. It offers no other benefit except a certain amount of sum to the nominees. It has no other functions like asset building or investment. Some term insurance plans give no money if the policyholder survives. However, these plans have lowest amount of premiums. You should choose a term insurance policy if you do not want to spend too much money on premiums and want nothing but cover for life.

FAQs

What is a life insurance policy?
A life insurance policy is a legal agreement between an insured and an insurance company. According to that a fixed amount of money is paid to the insured or the beneficiaries at the end of its term or upon the death of the insured.
Do I need life insurance?
Life insurance policy can provide you cover for life, as well as other benefits like pension after retirement, investment, a regular income and planning for children’s expenses depending on the life insurance policy you go for. Besides these all life insurance policies help you save money while paying taxes.
What is a premium?
Premium is the amount of money you pay monthly, quarterly or annually for continuing the insurance policy. The amount of the premium is decided at the time of the purchase of the policy.
How the premium is calculated?
A life insurance premium is calculated based on the policy holder’s age, health and the amount assured. It also depends on the policy of the insurance company.
What is nomination and a nominee?
When a person goes for a life insurance policy then at his death the closest relative who gets all the benefits is nominee and the process of appointing a nominee is known as nomination. A policy holder has right to nominate any of his relative as a nominee.
Can I get tax benefits if I get an insurance policy?
Yes. You can get tax benefits if you go for a life insurance. Under Section 88 of the Income Tax Act, tax rebate is provided to premiums paid. According to Section 80CCC of the Income Tax Act deduction is given for the contribution towards pension funds.
What is a claim?
When someone applies for payment of the benefit of an insurance policy then it is known as a claim.
What is a policy lapse?
A policy lapse is the termination of a policy due to the failure of the policyholder to pay the premiums within the grace period. The grace period is pre-determined by the insurance company.
Can I discontinue an insurance policy?
You can discontinue a policy by surrendering it. If you do not pay premiums for a specific amount of days then you are eligible for surrendering the policy. Then you can make a surrender request with your insurance company.