Got questions about life insurance? Check out these FAQs to understand how life insurance protects your family, secures your future, and helps you plan your finances smartly.

Q1. What is Life Insurance?

Life Insurance is a financial contract between an individual and an insurance company where the insurer promises to pay a fixed amount (sum assured) to the nominee in case of the policyholder’s death, in return for regular premium payments.

Q2. Why is Life Insurance important?

Because it provides financial security to your family in your absence, helps in long-term savings, and acts as a foundation for financial planning — protecting goals like education, loans, or retirement.

Q3. What are the key components of a life insurance policy?

  • Sum Assured – The guaranteed amount paid to the nominee.
  • Premium – The amount paid by the policyholder (monthly/annually).
  • Policy Term – Duration of the policy.
  • Nominee – The person who receives the benefits.
  • Maturity Benefit – Payout received if the policyholder survives the term (in certain plans).

Q4. What’s the difference between Term Insurance and Life Insurance?

Term Insurance is pure protection (death benefit only), while Life Insurance (like Endowment or ULIP) combines protection with savings or investment benefits.

Q5. What is the claim settlement ratio, and why does it matter?

It’s the percentage of claims an insurer settles vs. total claims received. A higher ratio (95%+) indicates reliability and trustworthiness.

Q6. What are the main types of Life Insurance products?

  • Term Insurance – Pure protection plan.
  • Endowment Plan – Protection + savings.
  • Money Back Plan – Periodic payouts during the policy term.
  • Whole Life Plan – Coverage till 99 or 100 years of age.
  • ULIP (Unit Linked Insurance Plan) – Insurance + market-linked investment.
  • Pension/Annuity Plan – Provides regular income post-retirement.
  • Child Plan – Secures a child’s education and future needs.

Q7. How does Term Insurance work?

You pay a small premium for a large sum assured. If the policyholder passes away during the term, the nominee gets the sum assured. If the policyholder survives, no maturity benefit is paid (unless it’s a return-of-premium plan).

Q8. What is a ULIP, and how is it different from mutual funds?

ULIP (Unit Linked Insurance Plan) offers both insurance protection and investment in equity or debt funds. Unlike mutual funds, ULIPs also provide a death benefit and tax benefits under Section 80C & 10(10D).

Q9. What is the benefit of a Pension or Retirement Plan?

It helps you accumulate a corpus during your working years and converts it into regular income (annuity) after retirement — ensuring financial independence.

Q10. How does a Money Back Plan differ from an Endowment Plan?

A Money Back Plan gives periodic payouts during the policy term, while an Endowment Plan pays a lump sum on maturity or on death.

Q11. How does life insurance help in financial planning?

It provides protection + savings + tax benefits, ensuring your long-term goals (like child education, retirement, or debt repayment) stay on track even in your absence.

Q12. How should I decide the right life cover amount?

A good rule is 10–15 times your annual income, or use the Human Life Value (HLV) approach — considering income, expenses, liabilities, and future goals.

Q13. How can life insurance be used for retirement planning?

Through Pension Plans and Guaranteed Income Plans, you can ensure a regular income post-retirement, complementing your EPF or NPS savings.

Q14. Can life insurance help in wealth creation?

Yes, products like ULIPs and Participating Endowment Plans allow long-term wealth accumulation while offering protection.

Q15. How does life insurance support child education goals?

Child Plans ensure your child’s education fund is secured, even if you’re not around, with features like premium waiver and guaranteed payouts at key milestones.

Q16. Why should life insurance be the first step before investments?

Because protection precedes growth, life insurance secures your foundation, so your investments can focus purely on wealth creation without risking family security.