Life insurance,made clear.

Life insurance is a promise from an insurance company: in return for regular payments (premiums), it will pay money to your family if you pass away. Many life insurance plans also pay you a sum of money if you are alive when the policy ends — combining protection with disciplined, long-term saving.

There are two broad families. Term plans offer only protection and are the cheapest way to get a large cover. Savings plans — the ones on this page — give a smaller cover for the same premium, but return money to you as well.

• 01

  Endowment

  What you get

  Cover during the term, plus a lump sum at the end

  Returns

  Steady, low-to-moderate

  Good for

  A future goal like a home or wedding

• 02

  Money back

  What you get

  Part of the money returned every few years, rest at the end

  Returns

  Steady, low-to-moderate

  Good for

  Regular needs such as school fees

• 03

  Whole life / income

  What you get

  Cover for life and often a yearly income

  Returns

  Steady and long-term

  Good for

  Retirement income and leaving a legacy

• 04

  Market-linked (ULIP)

  What you get

  Cover plus money invested in markets

  Returns

  Higher but can go up or down

  Good for

  Long-term investors comfortable with ups and downs

• 05

  Pension plan

  What you get

  A regular income after you retire

  Returns

  Guaranteed or market-linked

  Good for

  Retirement planning

• 01

  Guaranteed plans

  The amount you will receive is written in the policy on day one. You know exactly what you get — returns are typically modest but completely certain.

• 02

  Bonus plans

  The insurer shares its profits by adding a bonus each year. Bonuses are not promised in advance, but once added they cannot be taken away.

• 03

  Market-linked plans

  Your money is invested in funds that move with the stock and bond markets. Over long periods returns can be higher, but the value can also fall.

Over 15–20 years, most traditional savings plans return about 5–6% a year. They are best for safety and discipline rather than high growth.

• You want guaranteed or very low-risk savings for a specific goal
• You find it hard to save regularly and like a fixed commitment
• You want lifelong income in retirement
• You want to leave a definite sum for your family, whenever you pass away
• You already have enough term cover and want to add savings

If your main need is protection for your family, buy term insurance first. Savings plans give much less cover for the same premium.

1. 1

   Write down the goal and the year you need the money

2. 2

   Pick a plan whose payouts match that timing

3. 3

   Choose a premium you can comfortably pay every year until the end

4. 4

   Check the guaranteed amount separately from any bonus estimate

5. 5

   Compare the return you can expect with other safe options

You can surrender (close) most plans after the first one or two years, but you will usually get back less than you paid — especially in the early years. Before surrendering, ask about a loan against the policy or making it “paid-up”, where premiums stop and a reduced amount is paid at the end.

• 01

  Premiums

  Up to ₹1.5 lakh a year can reduce your taxable income under Section 80C, in the old tax regime.

• 02

  Maturity amount

  Usually tax-free. For policies bought after 1 April 2023, the maturity amount is taxable if total premiums across such policies exceed ₹5 lakh a year.

• 03

  Death payout

  Always tax-free for your family.