Life insurance is a financial contract between an individual and an insurance company. In this contract, the insurance company promises to pay a lump sum (called a death benefit) to the person’s nominee (usually a family member) in the event of the policyholder’s death during the policy term.
Key Purpose :
Household expenses, Children’s education, Outstanding debts (like home loans), Medical or emergency costs, Life goals like marriage or retirement (if survival benefits apply)
Documents Required
List of common documents required for buying a Life Insurance policy in India.
| Document Type | Details / Examples |
|---|---|
| Identity Proof (any one) |
Aadhaar Card, PAN Card, Passport, Voter ID, Driving License |
| Address Proof (any one) |
Aadhaar Card, Utility Bills (electricity/water/telephone), Passport, Voter ID, Rent Agreement |
| Age Proof (any one) |
Birth Certificate, PAN Card, School Leaving Certificate, Passport, Aadhaar Card |
| Income Proof | Latest ITR, Salary Slips (3–6 months), Bank Statements, Form 16, CA-certified proof (self-employed) |
| Medical Reports (if required) |
Medical Exam Report, Blood Test, ECG, Doctor’s Evaluation |
| Photograph | Recent passport-size photo |
| Proposal / Application Form | Duly filled and signed form |
| Optional / Additional |
Existing policy documents (portability/add-ons) Employer NOC (group schemes) Nominee’s ID proof (optional at proposal stage, required at claim) |
Types Of Life Insurance
| Type | Purpose | Payout |
|---|---|---|
| Term Insurance | Pure risk cover | Only on death during policy |
| Whole Life Insurance | Covers entire life | On death, any time |
| Endowment Plan | Insurance + savings | On death or policy maturity |
| ULIPs | Insurance + investment (market-linked) | Based on fund value |
| Money Back Plan | Periodic payouts + maturity benefit | Partial during term + final |
Benefit Of Life Insurance
1. Financial Protection for Family
Benefit: If the policyholder passes away, their family receives a lump sum to cover living expenses, education, loans, etc.
Real Example:
Ravi, age 35, had a ₹1 crore term insurance. He passed away unexpectedly. His wife received the ₹1 crore sum assured. This helped:
- Pay off their ₹40 lakh home loan
- Cover their 2 children’s education costs
- Maintain household expenses without borrowing
2. Debt Repayment
Benefit: Life insurance can prevent your family from inheriting your debts.
Real Example:
Pooja had a business loan of ₹25 lakh. She had a term policy of ₹50 lakh. After her passing, the payout covered:
- Her business debt
- A safety net for her aging parents
3. Tax Benefits
Benefit: Premiums are deductible under Section 80C and payouts are tax-free under Section 10(10D).
Real Example:
Arun pays ₹60,000/year and saves approx ₹18,000/year in taxes.
4. Peace of Mind
Benefit: Knowing your family is financially protected reduces stress.
Real Example:
Neha, a single mother, knew her ₹75 lakh term plan would cover her son’s school and college fees.
5. Wealth Creation (Investment-linked Policies)
Benefit: ULIPs and endowment plans offer maturity benefits.
Real Example:
Sunil, 30, paid ₹50,000/year for 20 years and received:
- ₹14 lakh lump sum (including bonuses)
He used it for his daughter’s wedding.
6. Coverage for Critical Illness (Add-on Rider)
Benefit: Pays on diagnosis of major illness even if the insured survives.
Real Example:
Kaushik had a ₹25 lakh critical illness rider. After being diagnosed with early-stage cancer, he received the full payout, which helped:
- Fund treatment at a private hospital
- Maintain income during a year-long break