In India life insurance came into existence in the year 1818.

Overseas insurance companies

were the major players in this field then. The astonishing fact was that Indians were charged
high premiums for life insurance as foreigners felt that an average Indian's life was subject to a
higher risk.

Intervention from the Indian government brought about a great transformation in the insurance
sector. LIC was the sole player dominating the arena of life insurance until the entry of private
life insurance companies. With private companies entering the foray, the entire sector has
become very competitive.

Understanding life insurance:

Uncertainties can never be ruled out in any person's life, yet risks in a person's life can be
covered to a certain extent. Life insurance in plain terms means cover for these risks in life.
Insurance policy shields us from eventualities in life that could affect us all of a sudden. Life
insurance is an agreement between two parties the insurer (insurance company) and the
insured (person who pays the premium/policy holder). The insurer pays the insured a sum
assured in case of any eventualities while the insured has to pay the premium at stipulated time
intervals. These unforeseen eventualities are termed as risk cover.

In general people have a wrong notion that life insurance policy helps only after a person's
demise. In reality life insurance acts as an investment for the secure future of one's family.
Earnings of a person may not remain steady all through his/her life; this is where a life
insurance policy can bail you and your family out by providing a steady income for the rest of
your lives.

Types of life insurance policies

Endowment policy:

Risk is covered for a specific period, at the end of the period, the sum assured along with the
accumulated bonus is paid back to the policyholder. This policy pays back the face value of the
amount on the insured person's death, after a stipulated number of years after premium
payment, or at a specified age of the policyholder.

Group insurance policy:

Group insurance plans are designed for specific group of people -. employee-employer, weaver
sections, co-operatives, etc. Premium paid under group insurance is much lesser than
individual premium payments. Group insurance policies have been specifically designed for
certain sections of people like doctors, lawyers, chartered accountants, etc.

Joint life policy:

They are just like endowment policies as they offer maturity benefits while covering risks. This
policy is unique as it covers two lives and is particularly suitable for married couple, business
partners, etc. The sum assured during the term of the policy is payable on the event of the first
death and again during the death of the survivor. Accumulated bonus will be paid at the event
of death of the survivor or at the policy maturity date if either of the policy holders survives until
the maturity date. Premiums have to be paid until the first death or up to the completion of the
term, whichever is earlier.

Loan cover term assurance policy:

This policy covers the home loan amount of the policyholder in case of any eventuality. Policy
cover reduces along with the EMI as the loan amount reduces with every EMI paid. In case of
death, the entire loan amount will be paid, if the complete loan amount has been paid off and
no amount will be received by the policyholder at the end of the term. This is purely a risk
coverage policy with nil returns at end of the term.

Money-back policy:

This policy repays survival benefits from time to time in parts during the term of the policy. This
policy is different from the endowment policy as it pays benefits from time to time while in
endowment policy benefits are paid only towards the end of the policy term. If the policyholder
expires during the term of the policy, the entire sum assured is paid without deducting the
already paid survival benefit amount. Besides the bonus is calculated on the entire sum
assured. This is the major advantage of money-back policies.

Pension plan or annuities:

This plan is a retirement solution plan and does not cover life insurance. A lump sum amount or
money in installments is paid for a certain period. On completion of this period, a certain
amount of money is received every month, every half-year, or every year. This amount is paid
throughout the life or for a certain period depending on the plan.

Term life policy:

In this plan, risk is covered only for a specified term. These policies can be used by people who
cannot afford to pay a lump sum amount on endowment assurance policy or whole life policy.
Premium has to be paid on time else the entire policy will lapse without gaining the paid-up
value.

Unit linked insurance plan:

ULIP is mainly designed for flexibility and safety of the investment. The sum invested is
denoted in units and its value is represented by Net Asset Value (NAV). NAV keeps varying
according to the current value of the underlying assets. ULIP offers various benefits to the
customer like .

 Life protection.
 Flexibility.
 Options to take additional cover against.
 Adjustable life cover.
 Investments and savings.
  Disability.
 Transparency.
 Death due to accidents.
 Surgeries.
 Investment options.
 Liquidity.
 Critical illness.
 Tax planning.

Whole life plan:

This policy exists until the policyholder is alive. Risk is covered for the entire life of the policy
holder thus this plan is named as whole life policy. Regular premiums have to paid by the policy
holder all through his/her life, the benefits are payable to the nominee of the beneficiary upon
the demise of the policy holder. No survival benefits are applicable as the policy holder is not
eligible to receive any money while he/she is alive.

Existing players in the field of life insurance:

IRDA has granted license for one public sector and twelve private life insurance companies in
India.

Public sector:

Life Insurance Corporation of India (LIC)

Private sector

 HDFC standard life insurance Co. limited

 Allianz bajaj life insurance company limited
 ICICI prudential life insurance Co. limited
 Max New York life insurance Co. limited
 Birla sun-life insurance company limited
 Om kotak mahindra life insurance Co. limited
 ING vysya life insurance company limited
 MetLife insurance company limited
 SBI life insurance company limited
 Reliance life insurance company limited
 Dabur CGU life insurance Co. private limited
 TATA AIG life insurance company limited

Benefits of life insurance policies

Life insurance is an investment for the future:

Life insurance schemes yield better when compared to other investment alternatives. Most of
the life insurance schemes offer bonuses that no other investment scheme can offer. The
money invested in life insurance is safe and covers risks; no other investment option gives this
cover. The money invested will fetch good returns and will be returned fully as sum assured
either after the completion of the term or after the demise of the insured. Both ways the money
invested and the returns are safely paid back.

Life insurance is the best method to cover risk in life:

Investing in life insurance gives you and your family a secure future. In case of any untoward
happening to the insured, the insurer pays up the entire amount i.e. the sum assured plus the
bonus to the bereaved family. Life insurance also safeguards the interest of people who have
diminishing incomes with advancing age, people who meet with accidents or for retired people.
There are numerous policies available and you can choose the policy that will best suit your
requirements.

Life insurance as a tax saver:

Life insurance is the best approach for tax planning/saving. The Indian government has
declared tax incentives for life insurance products. Tax incentives can be availed under Sec 88
of the Income tax Act, 1961. Any individual can claim a rebate of 20% on the annual premium
paid towards life insurance for his/her life and for his/her children or adult children. This tax
rebate is deductible from income tax payable by the individual or a Hindu undivided family. A
maximum of Rs. 12,000 can be claimed as rebate for an annual premium of Rs. 60,000, the
same rebate amount is applicable for annual premium up to Rs. 10 Lakhs.

Choose life insurance plans

 Life insurance companies are now targeting the lower-middle class and offer low
premium life insurance policies too. 
 To secure the future of your child, you can opt for child life insurance policy. This policy
covers the child's education, marriage and any other major events in life.
 There are policies to suit the need of senior citizens; low cost policies with low premiums
suit them the best.
 Whole life policies suit people who wish secure the life of their spouse or immediate
dependent.