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Life Insurance


Nothing in life is ever certain, and to guard against all contingencies is just not possible. A life insurance though, is a great safety net. It is designed to protect your family and other people who depend on you for financial support, in the event of your death.

While life insurance leaves you financially secure, you also enjoy other benefits such as tax-deduction options and in some cases long-term capital gains.

When you choose to invest in a life insurance policy, it is important to scout around and check various options. It is vital that the insurance you eventually invest in is the most suitable for your particular needs. So, when you think about how much you can afford to pay, it is essential to think about what you actually need from life insurance cover. This is where MoneyRaksha steps in, to make the selection process a comfortable one for you.

Benefits of life insurance

Like other investment modules, life insurance brings you several benefits:

  • Protection for your family. A life insurance is a guaranteed way to protect you family and other dependents in case of your unexpected demise. With a life insurance, the entire amount assured goes to your dependants.
  • Money when you need it. Life insurance is a sensible way to save for a rainy day. The payment of premiums in easy instalments allows you to easily save up for the long run. So, you have money for times when you need it, like for your children's education, marriage expenses, or retirement.
  • Liquidity. In many cases, a life insurance policy is accepted as collateral for a loan.
  • Tax relief. A life insurance policy offers tax deductions on income tax and wealth tax.


You can buy a life insurance policy as long as you are legally a major and you are eligible to enter into a valid contract. Students who earn while studying and those who take up full-time employment after their studies can opt for insurance as a profitable scheme to regulate their savings.

The policy is normally subject to certain conditions, like your state of health, income, and other factors that are considered relevant by the insurance company.

Types of life insurance policies

There are a variety of policies available in the market; choosing the right one depends on what you hope to achieve with it. Is it to provide for your family in case of your demise or is it a savings device?

Primarily, life insurance policies can be classified as:

Term insurance

A term insurance policy provides benefits to your family or dependents in the event of your death during the period covered by your policy. This term of the policy generally varies from 10 to 30 years. This policy is a financially efficient choice, especially for young people, as the premiums on the policy are comparatively lower and the likelihood of the person dying during the term of the policy is minimal. Also, term policies give you the flexibility to select a term that suits your need.

Endowment insurance

Endowment insurance is an ideal policy if you are planning for your retirement. Here, you make a regular investment over a long term and receive a lump sum at the end of the term. You enjoy not only the sum assured but also any bonus or guaranteed additions that may accrue during the policy term. Therefore, these plans are advisable if you want a product that provides both insurance cover and savings. However, you must note that the premium for endowment plans is higher in comparison to term plans.

Whole Life insurance

As the name suggests, whole life insurance covers your whole life, and is not restricted to a specific period. Since there is no fixed date for the policy, it comes only with a death benefit, which is paid to the beneficiary (your family/ dependents). As a policyholder, you will not be entitled to any money during your lifetime, i.e., there is no survival benefit.

Also, since the policy is spread across many years, the premium remains the same. This is convenient, as even older people on fixed incomes, can easily pay the premium.

Money back plan

Do you want to make use of the premiums you have paid for the insurance? Then, a money back plan is what you need. This plan provides life insurance for a specific period. However, during this period, you get a fixed, tax-free portion from the sum assured, at regular intervals. You can use this amount to fund an expense or to re-invest.

When the term comes to an end, you receive the balance portion of the assured sum along with any bonus or guaranteed addition that may accrue during the policy term. In the event of your death during the policy term, the nominee will receive the entire sum assured, even if you have received fixed portions of the sum assured during the term, and additional bonuses and guaranteed additions, if any.

A money back plan is, therefore, a great long-term saving device. However, the premium for these policies is higher in comparison to endowment and term plans.

Unit-Linked Insurance Plans (ULIPs)

Unit-Linked Insurance Plans (ULIPs) combine the benefits of a life insurance policy and an investment device. This means, a part of your premium is used to provide you with a life insurance cover while the residual portion is invested in a fund which in turn invests in stocks or bonds. The value of the investments changes depending on the performance of the underlying fund opted by you.

ULIPs are structured such that the insurance element and the investment element are distinguishable. This gives you the flexibility to manage the two portions according to your specific needs. At the end of the policy term, you receive the fund amount based on the value of the fund at the time.

Claim process

The claim process for life insurance is simple and straightforward. Generally, the insurance company sends you a voucher/ claim form at least a month before the end of the policy. You need to submit this claim form along with the original policy document. This is the basic documentation required although certain processes may vary from company to company. The insurance company processes the claim on verification of the documents.

Life Insurance FAQs