Life Insurance Plans

When Should I Buy Life Insurance?

The right time to buy life insurance is one of the most commonly asked questions. It is highly recommended that you should get a life insurance plan as early as possible to take advantage of lower premiums. 

Life insurance is not just about age—it is about your responsibilities and the premiums you need to pay to meet your life insurance needs. 

Disclaimer *Please note that these estimates are for illustrative purposes and might change as per your requirement and earnings.

Contact our Term Insurance Mumbai experts at 1800-266-9777 to discuss your needs and get an expert recommendation.

What are the key benefits of life insurance plans?

A life insurance policy does more than just offer financial protection. It supports your financial journey in various ways. From securing the future of your family to unlocking prudent planning options. Here are some of the benefits of life insurance plans:

• Financial support 

If something happens to the policyholder, the death benefit acts as a financial lifeline for the family. It replaces the lost income. This helps cover up essentials—rent, school fees, groceries or EMIs—so the lifestyle does not take a great hit.

For instance, if a salaried individual with two dependents passes away, a 1 crore term insurance can help cover the family manage expenditures for years with zero disruption.

• Loan collateral and EMI payments

Certain life insurance plans—especially traditional and endowment-based—can be used as collateral when making an application for loans. Plus, if the policyholder passes away, the death benefit can help pay off outstanding debts, like a home loan or personal loan, preventing the family from facing financial stress.

For example, if someone has a ₹30 lakh home loan and has a term insurance policy, then if something happens to them, the insurance money can help the family pay off the loan, so they do not have to fret about losing the house.

• Tax benefits

You can save tax¹ through life insurance policy in the flowing ways:

• Premiums paid qualify for tax deductions as per Section 80C¹ (up to ₹1.50 lakh per year).
• Maturity benefits is tax-free subject to the conditions prescribed in Section 10(10D)¹.
• Death proceeds are completely exempt from tax under Section 10(10D)
• Amount paid towards the premiums of health riders (like critical illness rider) qualify for tax deductions as per Section 80D subject to the conditions prescribed.
• If assessee has opted for Old tax regime, assessee shall be eligible to claim deduction under chapter VI-A (like Section 80C, 80D)¹ .

• Long term wealth creation 

Life insurance plans are one of the best long term investment plans. Life insurance plans such as ULIPs and endowment plans help in accumulation of wealth over the long term through disciplined investment along with life coverage. ULIPs also provide the opportunity to build your wealth faster by investing in equities but are riskier.

• Additional coverage 

Riders are like add-ons that enhance the coverage of your life insurance plans:

• Critical illness cover –

helps with medical expenses if you are diagnosed with a serious disease

• Accidental death benefit –

endows additional money to your family if death is due to an accident

• Waiver of premium –

stops your premium payments if you become disabled, but keeps the policy active Such add-on features assist your policy adjusts to life's unanticipated twists, so you and your family remain protected no matter what.

• Retirement Planning 

Certain life insurance plans such as pension & annuity plans serve as an effective tool to plan for your financial needs after retirement.

What are the types of life insurance plans?

Life insurance can be categorised into various types of life insurance plans such as term insurance plan, whole life insurance, traditional life insurance plan, market-linked life insurance plan and annuity plan. Let’s walk through the most popular options and how they can work for you:

1. Term life insurance 

Looking for high coverage at a low cost? A term life insurance policy is designed just for that. It offers pure protection—if something happens during the term (say 10, 20, or 30 years), your family gets the full sum assured. There’s no maturity benefit, but for income protection, this is often the smartest place to start.

2. Whole life insurance 

Want lifelong peace of mind? Whole life insurance covers you up to the age of 100. It is ideal if you are planning to leave a legacy or ensure financial continuity for your loved ones, no matter when life happens.

3. Endowment plans 

Saving for a major life goal? An endowment plan combines life insurance with guaranteed savings. It pays out either on maturity or in case of death, making it perfect for milestones like your child's education, home purchase, or a secure future fund.

4. ULIPs 

Do you prefer to grow your money while remaining protected? ULIPs offer life cover and invest part of your premium in market-associated funds (equity or debt). If you are fine with some market risk as well as aiming for long-term growth, then this plan can tick both protection and wealth creation boxes.

5. Child insurance plans 

Are you planning for your child's future? A child education plan ensures their dreams remain protected, even if you are not around for them. These plans offer maturity benefits timed with education milestones and often may waive off future premiums in the scenario of the policyholder's untimely demise.

6. Retirement/pension plans 

Thinking about early retirement? Great move must say. Retirement plans or pension plans assist in building a steady income for your golden years. They let you accumulate a corpus and then convert it into annuities. Well suited for professionals in their 30s or 40s planning long-term financial freedom.

7. Group life insurance 

Covered under an employer’s insurance? That is a start—but not enough. Group life insurance is usually part of your company’s benefits package. It offers basic coverage, but you’ll likely need a separate personal policy for comprehensive protection.

8. Money-back life insurance plans 

Want insurance that also gives you money during the policy term? A money back policy pays a portion of the sum assured at periodic intervals and the rest at the time of maturity. It is a great fit if you prefer liquidity—for school fees, EMIs or planned expenses—while remaining insured.

Each plan serves a different purpose—from simple protection to building wealth or securing your child’s future. Once you know what you need, picking the right life insurance plan becomes a whole lot easier.  

Tax Benefits of Life Insurance (Section 80C and Section 10(10D))

Purchasing life insurance will allow you to be eligible for tax deductions of up to ₹1.5 Lakh under Section 80C of the Income Tax Act, 1961¹. The amount you receive upon maturity will not be subjected to taxes as per the conditions laid out in Section 10(10D) of the Income Tax Act, 1961¹. Tax laws, however, can be amended from time to time. 

How Does A Term Insurance Policy Work?

A term insurance policy lends coverage for a specific period, which could vary from person to person. If the policyholder passes away within this term, the beneficiaries receive the death benefit. For example, Raj, a 30-year-old, buys a 1 crore term insurance policy with a 20-year term. He pays an annual premium of ₹10,000 to keep the policy active. If Raj passes away at 40, his beneficiaries receive the said ₹1 crore. The same amount will be paid if Raj expires at 35 or 45 years. The death benefit remains the same, irrespective of the total premium paid by the policyholder. However, this applies only if the policyholder has died within the covered term. If Raj survives the 20-year term, the coverage ends, and no payout is made unless he has opted for a return of premium rider. 

How to Choose the Best Life Insurance Policy?

Choosing the right life insurance policy is not about picking the first one you see—it is about finding a plan that fits your personal situation, your financial goals, and your future responsibilities. Here is the step-by-step guide to choose the best life insurance policy:

1. Define your financial goals and needs 

Before you decide which life insurance policy to buy you need to understand the reason for buying life insurance. Let’s map the type of life insurance plans with financial goals:

• Pure financial protection :
   

  If your primary goal is to provide financial protection to your loved ones then a term life insurance will serve the purpose. It provides a high sum assured at affordable premiums. 

• Savings and investments :
   

  If your goal is to invest and save for your future financial goals along with life coverage then you can buy an endowment policy (guaranteed returns) or Unit Linked Insurance Plan (market-linked returns). 

• Plan for retirement :
   

  If you are looking to secure your financial goals after retirement then you can opt for a retirement or pension plan. In case your need is of regular monthly income post-retirement then you can buy annuity plans. 

• Secure child’s future :
   

  If you want to secure your child’s financial future and save for your child’s education you get buy a child plan. 

2. Calculate the right coverage amount 

This is one of the important steps when choosing the best life insurance plan. The sum assured (the payout your nominee receives) should cover your financial obligations. A good rule of thumb: aim for a coverage amount which is 10–15 times your annual income. Here are some other factors that you can consider while calculating the right coverage amount: 

• Your family’s annual expenses :
   

  How much amount would your family require maintaining the same standard of living?

• Outstanding liabilities : 
   

  Include debts like mortgage and other substantial loans that your family would need to pay in your absence. 

• Future financial goals :
   

  Consider costs to fulfill future goals such as children’s education, marriage, spouse’s retirement needs any other financial goals adjusted for inflation. 

Tip: The Consumer Price Index (retail inflation) is 2.82% and education inflation is 4.12% in India for May 2025. 

• Existing savings and assets :

  Deduct your current savings and value of liquid assets from the total amount. 

3. Choose the right policy term 

You should ideally choose the policy term as the duration for which your family will be financially dependent on you. As a thumb rule you can select a policy term till the time you retire, any major financial liabilities (home loan) are fulfilled, and your children are financially independent.   

4. Understand your life stage and health condition 

Your age and health matter more than you think. Buying life insurance early — in your 20s or early 30s — means lower premiums and more options to choose from. As you grow older or develop health conditions, premiums rise, and coverage could get restricted.

Are you planning to marry, start a family, or launch a business? These milestones should shape your life insurance strategy. Also, be prepared for medical check-ups and underwriting, especially for high coverage policies. The earlier you plan, the easier and cheaper it is. 

5. Compare and evaluate insurers 

You are not just choosing a policy—you are choosing a partner for life. Check these metrics:

• Claim settlement ratio (CSR) :
   

  Shows how frequently the insurer pays out claims. A claim settlement ratio of more than 99.68% ## implies high reliability on the insurer.

• Solvency ratio :
   

  This indicates the financial strength of the insurer. The IRDAI recommends a solvency ratio equal to 1.5 or more.

• Premium affordability :
   

  Use online calculators such as term insurance premium calculator to find out which insurers provide the highest live coverage at the most affordable premiums.  

• Customer service :
   

  Read customer reviews to get an understanding of the insurers' claim settlement process and overall customer service.  

Tip: You must check these out on the website of IRDAI or the insurer’s annual report before zeroing in on any insurance.

6. Look for policy flexibility 

Check for flexibilities offered by the life insurance policy like - 

• Increasing the coverage after a major life event (after marriage or childbirth).
• Changing your policy term or sum assured
• Partial withdrawal option in the case of ULIPs
• Free fund switches in ULIPs
• Convertible or renewable term plans

Why it matters: Flexibility makes your policy future-proof.

7. Review add-ons and riders 

Think of riders as power-ups for your policy. Common riders are:

• Accidental death benefit
• Critical illness cover
• Waiver of premium (zero premiums if you are disabled)
•  Income benefit rider (regular payouts to your family members post-death)

Zero in on riders that fit your lifestyle, health history and family responsibilities.

8. Go through the fine print and policy reviews 

Always check out:

• Policy exclusions (what is not covered)
• Lock-in period
• Surrender/exit clauses

What Is Human Life Value, and Why Should You consider it Before Deciding On Your Life Cover?

Human Life Value is a financial concept that determines the current value of your liabilities, expenses, and investments. This indicator helps you estimate the amount necessary to provide financial security to your family during your sudden demise or any unfortunate incident. For an accurate calculation, take the help of the Human Life Value (HLV) calculator. 

• Why Consider HLV Before Deciding on Your Life Cover?

Let’s consider the factors behind considering HLV:

a) Financial Planning: With proper financial planning, you can achieve financial stability. Using the HLV calculator, you can assess the economic value of an individual's life.

b) Estate Planning: The HLV calculator provides a clear image of an individual's financial condition. This thereby helps in distributing wealth among heirs.

c) Insurance Coverage: HLV is important to calculate when determining life insurance coverage. Life insurance is instrumental in building a solid financial foundation.

d) Business and Partnership Valuation: HLV is important to calculate to determine each partner's contribution to business. Upon the untimely demise of a business partner, the HLV assists the deceased partner's family members. 

Should One Buy More Than One Life Insurance Policy?

This decision completely depends upon your present financial health and future needs and goals. Whether you should have multiple policies depends on how much coverage you are seeking. More policies, on the one hand, can widen the coverage, but on the other, they can be a financial burden in your present circumstances.  

Having multiple policies works for those seeking to reduce risk and ensure that they have another policy to bank upon in case of delayed or rejected claim settlement from one.

Still, managing multiple policies can be challenging, with risks of delayed or missed premium payments, leading to coverage lapses. Hence, it is best to assess the risks and rewards of this decision before going ahead with multiple policies.

How to Save Tax on a Life Insurance Policy?

Life insurance policies are one of the financial products in India that can help you save tax through various Sections—80C, 80D, and 10(10D) of the Income Tax Act, 19611. Here is how you can save tax with your life insurance plans:

1. Section 80C

Under Section 80C¹, you can claim a deduction of up to ₹1.5 lakh per financial year on premiums paid for yourself, spouse and children under a life insurance policy in case of individual taxpayer, 

• Applicable to term insurance, endowment plans, and ULIPs and other life insurance policy.

• Policy should be active and the premiums must be paid within the said Financial Year.

• For policy issued before 01st April 2012, the premium paid deduction is restricted to 20% of the actual capital sum assuredFor policy issued on or after 01st April 2012, the premium paid deduction is restricted to 10% of actual capital sum assured.

• For Policy issued on or after 01st April 2013 for person with disability under Section 80U or person suffering for specified disease under Section 80DDB, the premium paid deduction is restricted to 15% of actual capital sum assured.

• If you belong to the 30% income tax slab, then you can save up to Rs. 46,800/- annually. 

• If you stop paying premiums before the minimum required period i.e 2 years for traditional policies (non-ULIP), and 5 years for ULIPs, you will lose the tax deduction for premiums paid in that year. Also, all deductions you claimed for earlier years will be added back to your income in that year and taxed.

Tip: It is essential to note that the total deduction available under section 80C of the Income Tax Act, 1961, considering all the prescribed investments allowed including NPS, PPF, ELSS, Tuition fee, etc under this section should not exceed Rs.1,50,000 per year and is available under the Old Tax Regime only.

2. Section 80D

While deductions under Section 80D¹ are widely associated with health insurance, it also applies to life insurance policies that include health-related riders, such as critical illness or hospital  benefit riders. 

• The deduction under this section is applicable for insurance premiums paid on the health of self, spouse, and children. The maximum deduction available for the family shall be ₹25,000. In case the insurance premium paid on the health of a senior citizen in the family then an additional deduction of ₹25,000 shall be available.

• Additionally, they can claim up to ₹25,000 for premiums paid for their parents. which increases to ₹50,000 if the parents are senior citizens. In totality the maximum deduction available can be ₹1,00,000 if both self/family and parents are senior citizens.

• In addition to above, amounts paid on account of preventive check-up for the family, deduction for a maximum ₹5000 can be claimed in a year.

• Only the premium portion allocated to the health rider under a life insurance policy qualifies for this deduction. 

Note: Many people miss this advantage, assuming section 80D only applies to Mediclaim policies. If your life insurance has a relevant rider, don’t forget to claim it.

3. Section 10(10D)

As per Section 10(10D) 1, payouts from life insurance policies are tax-exempt at the time of maturity , subject to conditions prescribed and death benefits is completely exempt for tax

• Death benefit - Completely tax-free for the nominee, irrespective of the premium and sum assured amount

• Maturity benefit - Returns are taxed as follows:

- In the case of ULIPs issued on or after February 1, 2021, if annual premium does not exceed Rs.2.5 lakh then the maturity proceeds are tax-free subject to other conditions prescribed. However, if the policy does not satisfy the conditions then at the time of maturity, long term Capital gain (LTCG) will be taxable @ 12.5%, under the head "Income from Capital Gains”, an exemption of LTCG upto Rs 1.25 lac shall also be available annually. 

- In case of non-ULIP issued on or after April 1, 2023, if annual premium does not exceed Rs. 5 lakhs then the maturity proceeds are tax-free subject to other conditions prescribed. However, if the policy does not satisfy the conditions prescribed then, at the time of maturity, net income under such policy would be chargeable to tax as 'Income from Other Sources' under section 56^(2)(xiii) of the Act. 

4. Surrender value

• In case of ULIP, If you surrender post  the lock then the surrender value less premium paid is added to your income and taxed at 12.5% under the head "Income from Capital Gains”, an exemption of LTCG upto Rs 1.25 lac shall also be available annually. However, if such policy is compliant with the conditions mentioned in Section 10(10D) then such surrender is tax free. It is also essential to note that If you stop paying premiums before the minimum required period of 5 years, you will lose the tax deduction for premiums paid in that year. Also, all deductions you claimed for earlier years will be added back to your income in that year and taxed. 

• In case of Non-ULIP, If you surrender before the policy term such surrender is taxable in case the policy is not compliant under Section 10(10D) of the Income Tax Act, 1961. It is also to be noted that If you stop paying premiums before the minimum required period of 2 years, you will lose the tax deduction for premiums paid in that year. Also, all deductions you claimed for earlier years will be added back to your income in that year and taxed.

Claim in Case of Death

If there is a sudden demise of the insured individual, the nominee can then continue following the below-mentioned steps for raising a life insurance policy claim:

• Inform immediately the insurer about the unexpected event taking place through call, website, email or in-person
• Keep all relevant documents ready and submit them. These documents include documents relating to hospitalisation, death certificates and others. KYC proofs should also be attached including an Aadhaar card, PAN card and other necessary documents. Alongside this, make sure to FIR papers if there is any accidental death or suicide or present a cancellation cheque.
• The documents are further reviewed and a settlement is issued from the respective insurance company.

Crucial Situations When You Should Consider Reviewing Your Policy

Here are some situations when you need to consider reviewing your life insurance policy:

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