Life insurance is a unique financial product that can achieve various financial objectives. It can be utilized as a financial cover for your beloved family and dependents, provide a second source of income during retirement, and build a corpus for the child's future higher education and marriage. Also, life insurance policies can be used as a tax-efficient legacy tool to pass on wealth from one generation to the next.
Let us find out the different types of life insurance and understand their specific features.
Term insurance is an affordable form of life insurance. Financial protection is provided to the nominee(s)/dependent(s) in case the policyholder dies during the policy tenure. The term insurance money paid by the insurer can be used to secure your family’s financial future if you are no longer around.
Married couples, parents, young professionals are among the individuals who should buy term insurance.Term insurance premiums are deductible from taxable income under Section 80C of the Income Tax Act; thus, they may provide instant tax benefit* to you.
- Life cover - A term plan gives high life cover for a small premium.For instance, ICICI Pru iProtect Smart gives a 25-year old (non-smoker) a ₹ 1 Crore term insurance cover for ₹ 490^ per month premium.
- Fixed premium - The premium amount and life coverage (sum assured) are fixed at the time of selection and purchase. This means premiums payable throughout the selected term remain the same for the fixed life cover.
- Longer cover - Term insurance plans can provide coverage well beyond 60 years of age. Plus, the policyholder pays a premium amount, which is fixed for the entire duration. If you want cover for as high as 99 years of age, you can get whole life insurance with ICICI Pru iProtect Smart.
- Payout options -Term insurance claim money can be can be claimed by the nominee via various payout options. The life insurance payout can be received in lump sum form i.e. single payment, or in income form i.e. annual or monthly payments, or a combination of both lump sum and income form.
- Optional critical illness benefit+ - ICICI Pru iProtect Smart term insurance gives you the optional benefit of payout on the diagnosis of as many as 34 critical illnesses. No hospital bills are required to claim this amount.
- Optional accidental death cover - Term insurance lets you add accidental cover of your choice during purchase or, even after purchase. For example, if you buy life cover of ₹ 1 crore with accident benefit of ₹ 50 lakh, your nominee will get ₹ 1.5 crore in case of death due to accident. Maximum accidental death cover available with ICICI Pru iProtect Smart is ₹ 2 crore.
- Terminal illness benefit - Some term insurance plans pay out your entire insurance cover amount i.e. sum assured even before death, if you are diagnosed by a terminal illness.
- Waiver of premium# - With ICICI Pru iProtect Smart term plan, in case of permanent disability due to an accident, all future premiums of the policy, which were to be paid by the policyholder are borne by the company, and the life cover stays intact.
Child insurance plans
Child insurance plans are designed to share the burden of taking care of your protection and savings needs for securing the future of your children.
- Fund power - You have the option to invest in a wide range of funds to generate the required corpus. These plans help you to save money for your child’s future, so that they can fulfil goals like higher education and marriage.
- Flexible premiums -The parent has the flexibility to pay premiums either at regular intervals or single pay.
- Benefit variety - At the end of the policy term or on its maturity, a lump sum amount is paid to the policy holder. Some child insurance plans provide you with additional loyalty and wealth boosters which gets added to the lump sum maturity amount. In case of an unfortunate event during the policy term, the child is entitled to the entire cover amount, which will help take care of the child's dreams and aspirations.
- Premium waiver - Some new child insurance policies waive future premium payments for the remaining policy term if a parent dies. For instance, if the father/mother of a child unfortunately dies after buying a child insurance plan, the policy provides the surviving parent with a lump sum death benefit. This money helps the surviving parent and child take care of their immediate needs. The insurance company also pays all future premiums, which ensures the child enjoys the future which the parents had planned for.
- Tax benefit* - Child insurance plan premiums paid may be deductible from taxable income under Section 80C and maturity benefit paid may be tax-free under Section 10(10D).
Money back insurance plans
Money back insurance plans are traditional policies. These life insurance investment plans give you double benefit of life insurance and savings.
- Enhanced savings plus life cover - Money back plans add extra to your savings. In addition to securing yourself and your family, you also create potential wealth over time and move closer to meet your financial goals.
- Second income stream - Money back insurance plans help you create a second and regular stream of income throughout your policy tenure. This regular second income can be used to fulfil daily and monthly needs like child's education, vacation expenses etc. The money back happens as per a predefined schedule.
- Maturity benefit - At the end of the policy term, a money back insurance plan also gives lump sum maturity amount including guaranteed additions and bonuses.
- Tax benefit* - Money back insurance plan premiums paid may be deductible from taxable income under Section 80C and maturity benefit paid may be tax-free under Section 10(10D).
Endowment plan is a life insurance policy that provides a combination of insurance cover and savings plan. It helps you in saving regularly over a specific period of time.
- Steady return - On policy maturity, endowment plan gives you a lump sum including guaranteed maturity benefit and bonuses. Thus, endowment plans strike a balance between return and low risk.
- Life cover - Endowment plans provide life cover, which provides financial security to your loved ones. In case of unfortunate demise of the policyholder, the insurance company will pay the entire life cover amount to the nominee of the policy.
- Tax benefit* - Endowment plans may give you tax exemption on premium payment under Section 80C. The maturity benefit may be tax-free under Section 10(10D).
ULIP or Unit Linked Insurance Plan is a type of Insurance gives the best of both worlds - protection and wealth creation- in a single plan. Your investment money in a ULIP can grow faster while your beloved one’s future is protected from life's unexpected turns with insurance.
- Life cover - The nominee(s) will get financial protection in form of death benefit, if the policyholder unfortunately passes away during the term of the ULIP. If the policyholder survives the term of the ULIP, he/she gets the maturity benefits.
- Choice of funds - You can choose to invest your ULIP premium from a range of fund options to suit your risk profile and investment horizon.
- Wealth boosters - Some ULIPs provide regular wealth boosters, as a percentage of a premium paid, as an incentive for long-term investing.
- Loyalty bonus - As a reward, loyalty bonus is given by some ULIPs to enhance your corpus at the time of maturity.
- Investment strategies - ULIPs offer investors choice of 3-4 portfolio strategies, such as systematic transfer, lifecycle based approach etc. to enhance returns. They give you flexibility and are aligned to your various needs.
- Partial withdrawals - ULIPs give you an option to withdraw a part of your money after the end of 5th year, thus providing you with additional liquidity.
- Fund switch - In ULIPs, you can move your money between equity, debt and balanced funds effortlessly and without any tax impact.
- Return of charges` - Some low-cost ULIPs like ICICI Pru Signature fully return mortality charge (cost of insurance) and policy administration charge on maturity. However, this is not applicable for whole life option.
- Tax benefit* - Invested premiums in ULIPs may be eligible for deduction from taxable income under Section 80C, up to ₹ 1.50 lakh per annum. The maturity proceeds of the ULIP may be also exempt from tax under Section 10(10D).
Whole life plans
A whole life plan is a type of life insurance that provides guaranteed death benefits during the entire life of the policyholder. The coverage is extended for as long as the insured person lives and as long as the premiums are paid.
- Cover till 99 years - Whole life plans cover you for 99 years age. This gives long cover, and provides financial shield to the nominee.
- Special needs - Whole life plans are ideal for those who have financial dependents for a relatively longer period of time, for e.g. if you have children with special needs or a financially dependent spouse.
- Level premium - The premium under whole life plans remain fixed for the entire term of the policy, which means there is no extra burden once you get older.
- Tax benefit* - Whole life insurance plan premiums paid may be deductible from taxable income under Section 80C of the Income Tax Act. The death amount paid on claim may be tax-free under Section 10(10D).
1. Can I buy life insurance riders without first purchasing a base policy?
No, you cannot buy a life insurance rider without first purchasing a base policy. Riders can be added on top of a base policy at an added premium to enhance the plan’s benefits. They cannot be bought as stand-alone product.
2. Can I customise the coverage and benefits of my life insurance policy?
Yes, life insurance plans offer options to customise the coverage and benefits according to your needs. You can select features of life insurance, such as the policy term, riders, coverage and other similar options to customise the policy to your requirements.
3. Are there any age restrictions for purchasing a life insurance policy?
You can buy a life insurance policy between the age of 18 and 60 years. However, this may differ from insurer to insurer and plan to plan. It is advised to check with the insurance company and read all the policy related documents beforehand.
4. What are the tax implications of life insurance policies?
The premium paid towards a life insurance plan is eligible for a deduction up to ₹ 1.5 lakh per annum subject to conditions under section 80C* of The Income Tax Act, 1961. Also, proceeds from the life insurance policy received by the beneficiary is exempt subject to conditions prescribed under Section 10(10D)* of The Income Tax Act, 1961.
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^ The premium for a 22 year old healthy male for a life cover of ₹1 crore for the ICICI Pru iProtect Smart – Life Option under the regular income payout option for a policy term of 19 years is ₹ 5,824 p.a (inclusive of all taxes).
` Return of mortality and policy administration charges is subject to all due premiums being paid and the policy being in force on the date of maturity. This feature is only available under ICICI Pru Signature Online version. This is not applicable for Whole Life option.
* Tax benefits are subject to conditions prescribed under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details.
# Refer the product brochure for the definitions, exclusions and other terms and conditions applicable for Permanent Disability due to accident and Terminal Illness.
+ Critical Illness Benefit is optional and available under Life and Health and All in One options. This benefit is payable, on first occurrence of any of the 34 illnesses covered. The CI Benefit, is accelerated and not an additional benefit which means the policy will continue with the Death Benefit reduced by the extent of the CI Benefit paid. The future premiums payable under the policy will reduce proportionately. If CI Benefit paid is equal to the Death Benefit, the policy will terminate on payment of the CI Benefit. To know more in detail about CI Benefit, terms & conditions governing it, kindly refer to sales brochure. Critical Illness benefit is available till age of 75. The CI Benefit for Angioplasty is subject to a maximum of ₹ 5,00,000. On payment of Angioplasty, if the ACI Benefit is more than ₹ 5,00,000 the policy will continue for other CIs with ACI Benefit reduced by Angioplasty payout.
^ The premium of ₹540 p.m. has been approximately calculated for a 18 year old healthy male life with monthly mode of payment and premiums paid regularly for the policy term of 36 years with income payout option with Life Cover of ₹1 crore. Goods and Services tax and/or applicable cesses (if any) as per applicable rates will be charged extra.
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