Life Insurance

• Life Insurance is a contract between the

insurer (insurance company) and the insured
(policyholder), where the insurer promises to
pay a certain sum of money (sum assured)
either on the death of the insured or on
maturity, in return for regular premium
payments.
1. Uses of Life Insurance
Financial Security to Family
• Provides immediate financial support to the dependents of the insured after death.
• Example: A family loses its earning member, the insurance payout helps in meeting daily expenses,
children’s education, etc.
Savings & Investment Tool
• Endowment and money-back policies combine insurance with savings.
• Example: A 20-year endowment plan pays a lump sum at maturity even if the insured survives.
Retirement Planning
• Pension and annuity plans ensure regular income during old age.
• Example: Monthly pension from LIC Jeevan Akshay after retirement.
Tax Benefits
• Premiums are deductible under Section 80C (India).
• Maturity proceeds may be tax-free under Section 10(10D).
Loan Facility
• Policyholders can borrow money against the surrender value of their life insurance.
Wealth Creation
• ULIPs (Unit Linked Insurance Plans) invest in stock markets, offering insurance + investment growth.
Encourages Saving Habit
• Premium payments inculcate discipline of regular savings.
Peace of Mind
2. Scope of Life Insurance
Life insurance has wide coverage:
Personal Scope
• Protection to individuals and families against financial loss.
• Supports education, healthcare, marriage, housing, and retirement.
Business Scope
• Keyman Insurance: Protects businesses from the loss of key employees.
• Partnership Insurance: Provides funds in case of a partner’s death, ensuring business
continuity.
• Group Insurance: Employers provide life cover to employees as a welfare measure.
Social Scope
• Promotes social security and reduces the burden on government welfare programs.
• Micro-insurance provides affordable protection for low-income groups.
Economic Scope
• Insurance companies collect large funds through premiums.
• These funds are invested in infrastructure, industries, and government securities, helping in
capital formation.
Global Scope
• Life insurance is a worldwide industry.
• With globalization, multinational insurance companies operate across borders, offering
customized policies.
3. Nature of Life Insurance
Contractual Agreement
• A legal contract under the Indian Contract Act, 1872.
• Involves offer, acceptance, consideration (premium), and consent.
Risk Cover
• Provides protection against the risk of premature death.
Dual Purpose (Protection + Investment)
• Unlike general insurance, life insurance serves as both financial protection and a long-term
investment.
Based on Human Life Value (HLV)
• The economic worth of an individual’s future income is insured.
Long-Term Relationship
• Policies usually run for 10, 20, or more years, unlike short-term general insurance contracts.
Intangible Service
• It provides financial security, which is not a physical product but a promise of compensation.
Regulated Activity
• In India, life insurance is regulated by IRDAI (Insurance Regulatory and Development Authority
of India).
Principles of Insurance Applied
• Utmost good faith (disclosure of facts).
• Insurable interest (beneficiary must suffer financial loss if insured dies).
• Risk pooling (premiums from many are pooled to pay claims).
4. Role of Life Insurance
(i) Role for Individuals & Families
• Provides financial security in case of the policyholder’s death.
• Acts as a source of funds for children’s education, marriage, medical needs, and retirement.
• Provides a sense of stability and peace of mind.
(ii) Role for Business
• Business Continuity: Partnership insurance ensures smooth transfer of ownership.
• Employee Welfare: Group life insurance motivates employees and provides loyalty.
• Risk Management: Keyman insurance protects against sudden loss of skilled personnel.
(iii) Role for Society
• Protects poor and vulnerable sections through micro-insurance schemes.
• Reduces the need for government relief measures during crises.
• Provides social stability by reducing the risk of poverty after the death of breadwinners.
(iv) Role for Economy
• Capital Formation: Premiums collected are invested in government bonds, industries, and
infrastructure projects.
• Long-Term Funds: Provides stable funds for economic development.
• Boosts Financial System: Insurance companies act as institutional investors.
• Supports GDP Growth: By mobilizing savings and reducing financial risks.
Overview of topic
Aspect Details Examples
- Provides financial security to family - Acts as
savings & investment tool - Retirement planning
Term Insurance (protection), Endowment/Money-
Uses through pension/annuity - Tax benefits (Sec. 80C,
back (savings), ULIP (investment), Pension Plans
10(10D)) - Loan facility on policies - Encourages
savings habit - Peace of mind

- Personal: Protects individuals & families -

Business: Keyman insurance, partnership insurance,
group insurance - Social: Supports weaker sections,
LIC Jeevan Anand (individual), Employer Group
Scope reduces govt. burden - Economic: Capital formation,
Policies, Micro-insurance for rural areas
investment in infra, supports economy - Global:
Expanding worldwide, includes micro-insurance &
international insurers

- Legal contract between insurer & insured - Provides

risk cover (death/survival benefits) - Combines
Protection + Investment - Based on Human Life
Life cover for 20 years, maturity benefits, pension
Nature Value (HLV) - Long-term in nature (10–20+ years) -
annuities
Intangible service (financial promise, not a product) -
Regulated by IRDAI in India - Based on principles:
Utmost Good Faith, Insurable Interest, Risk Pooling

- For Individuals/Families: Provides financial

stability, funds for education, marriage, retirement -
For Business: Employee welfare (group policies),
Family protection, Business insurance, Government
Role keyman cover, ensures business continuity - For
infrastructure funded by insurance investments
Society: Social security, financial inclusion, reduces
poverty - For Economy: Capital formation, long-
term funds, boosts financial market, supports GDP
 Types of Life Insurance- Life insurance policies can be broadly classified into
Protection-Oriented and Savings/Investment-Oriented.

.1 Term Life Insurance (Pure Protection Plan)

Definition: Provides financial protection for a fixed period (say
10, 20, or 30 years).
Features:
• Cheapest form of life insurance.
• Only pays death benefit if the insured dies during policy term.
• No maturity benefit (if insured survives).
• Who should buy?: Young earners, breadwinners with
dependents.
• Example: LIC Tech-Term Plan, HDFC Click2Protect.
Young earners:
• They have limited income but need large financial protection for their family.
• Term insurance offers very high cover at low premium, which is affordable at an
early stage of career.
Breadwinners with dependents:
Meaning of Breadwinner
• A breadwinner is the main earning member of a family — the one who
earns money to support dependents (spouse, children, parents, siblings).
• The term comes from the idea that the person earns to "bring bread to the
table" (i.e., provide food, shelter, education, and other needs).

• If you are the main income source for your family (spouse, children, parents), their
financial future is at risk if something happens to you.
• Term insurance ensures that dependents continue to receive financial support
(education, living expenses, loans repayment, etc.).

Term Life Insurance is most suitable for young people just starting
their careers and for family breadwinners who have financial
dependents.
• 2. Whole Life Insurance
• Definition: Provides coverage for the entire lifetime of the insured
(usually up to 100 years).
• Features:
• Premiums are paid for a limited period or whole life.
• Death benefit + Bonus (if participating policy).
• Some policies offer surrender value/loan facility.
• Who should buy?: People wanting lifelong protection + wealth transfer
to heirs.
• Who are Heirs?
Heirs are the legal successors of a person — the individuals who have
the right to inherit the person’s property, wealth, or assets after death.
In family terms: heirs are usually children, spouse, parents, or
relatives as per law or will.

• Example: LIC Jeevan Umang.

• Types of Heirs
• Legal Heirs (by Law)
• People who are automatically entitled to inherit property if no will is
made.
• In India (Hindu Succession Act, Muslim Law, Christian Law etc.), heirs
may include:
• Spouse (husband/wife)
• Children (sons, daughters, adopted children)
• Parents (mother, father)
• In some cases, siblings or extended family
• Heirs by Will (Nominees/Beneficiaries)
• A person can nominate someone in a life insurance policy or write a
will specifying who should receive the wealth.
Example: A father may choose to leave his life insurance money only to
his daughter.
• 3. Endowment Policy
Endowment = Insurance + Savings.
It ensures that either the family gets money (if insured dies
early) or the insured gets money himself (if he survives till
maturity).

• Definition: Combines insurance with savings. Provides a lump

sum either on death or survival at maturity.
• Features:
• Higher premiums than term plan.
• Maturity benefit (sum assured + bonus) if insured survives.
• Useful for planned goals (education, marriage, housing).
• Who should buy?: Those looking for disciplined savings +
protection.
• Example: LIC New Endowment Plan.
• Meaning of Endowment
• In life insurance, an Endowment Policy is a type of plan that
combines life insurance protection with savings.
In simple words:
• If the policyholder dies during the policy term, the nominee
gets the sum assured + bonuses.
• If the policyholder survives till maturity, he/she gets the
sum assured + bonuses as a lump sum.
• So, it’s like insurance + forced savings in one plan.
• Key Features of Endowment Plans
• Dual Benefit → Provides financial protection (insurance) +
savings/investment return (maturity).
• Maturity Benefit → Guaranteed payout at the end of policy
term, even if insured survives.
• Death Benefit → Full sum assured + bonus paid to nominee in
case of early death.
• Bonus Facility → Most endowment plans are “participating
policies,” meaning they share in insurer’s profits.
• Loan Facility → Policy can be used as collateral to borrow
money.
• Higher Premium → Premiums are higher than pure term plans
because of savings component.
• Who Should Buy an Endowment Plan?
• People who want financial protection + disciplined
savings.
• Those planning for future expenses like children’s education,
marriage, or buying a house.
• Salaried individuals wanting a mix of insurance + investment.
Aspect Endowment Policy Term Policy
Life insurance + savings plan Pure protection plan (only death
Meaning
(protection + maturity benefit). cover, no savings).
Pays sum assured + bonus on Pays sum assured only if the
Coverage
death or on survival at maturity. insured dies during policy term.
Yes (policyholder gets money if No (nothing paid if policyholder
Maturity Benefit
he survives). survives).
Death Benefit Sum assured + bonuses (if any). Only sum assured (fixed).
High (because of savings + Low (because it covers only
Premium
insurance). risk).
Yes, acts as a
Investment Element No, purely risk cover.
savings/investment tool.
Moderate (cover is usually lower
High (much larger cover
Risk Coverage compared to term insurance for
available for small premium).
same premium).
People who want insurance + Young earners and breadwinners
forced savings + future lump with dependents who need
Best For
sum (e.g., for children’s maximum protection at lowest
education/marriage). cost.
LIC New Endowment Plan, LIC LIC Tech-Term, HDFC
Example
Jeevan Anand. Click2Protect.
• 4. Money-Back Policy
• Definition: A type of endowment plan where a portion of sum
assured is paid at regular intervals during the policy term.

A Money Back Policy is a type of endowment plan that provides:

• Life cover (insurance protection),
• Periodic payouts during the policy term, and
• Lump sum maturity benefit if the insured survives.
It is often called a “survival benefit plan.”
Features:
• Survival benefits paid periodically (e.g., every 5 years).
• Balance + bonuses paid at maturity.
• Death during term → full sum assured paid (not reduced by earlier payouts).
• Who should buy?: People needing liquidity at intervals (parents,
professionals).
• Example: LIC Money Back Plan (20/25 years).
• Key Features
• Survival Benefits (Periodic Payouts)
• During the policy term, the insured receives a fixed % of the sum assured at regular
intervals (say every 5 years).
• This provides liquidity for expenses like children’s education, marriage, etc.
• Death Benefit
• If the insured dies during the policy term, the nominee gets the full sum assured
(not reduced by earlier payouts) + bonuses.
• Maturity Benefit
• If the insured survives till the end of the term, they get the remaining sum
assured + accrued bonuses.
• Loan Facility
• Policyholders can take loans against the policy.
• Tax Benefits
• Premiums eligible under Sec 80C, maturity/death benefit exempt under Sec 10(10D)
(India).
• Bonus Participation
• Most money back plans are participating, meaning they earn bonuses declared by
the insurer.
• Example
• Ramesh buys a 20-year Money Back Policy with a ₹10 lakh
sum assured.
• Survival Benefits: Every 5 years, he gets 20% of SA = ₹2
lakh. (At 5th, 10th, and 15th year → ₹6 lakh total).
• At maturity (20 years): He gets the remaining ₹4 lakh +
bonuses.
• If he dies in 12th year: His nominee gets the full ₹10 lakh +
bonus, regardless of the ₹4 lakh already paid.
• Advantages
Combines protection + savings + liquidity.
Provides money at intervals to meet life goals.
Death benefit is not reduced by earlier payouts.
Disadvantages
Premiums are higher compared to term insurance.
Returns are relatively low (4–6% approx.) compared to other
investments like mutual funds.
• Popular Examples (India)
• LIC Money Back Plan – 20 Years / 25 Years
• LIC Jeevan Tarun (child-focused money back policy)
• SBI Life Smart Money Back Gold
Aspect Money Back Policy Endowment Policy
Insurance + Savings plan that pays
Insurance + Savings plan that pays
periodic survival benefits (a % of
Meaning lump sum only at maturity (if
sum assured) during the policy
insured survives) or on death.
term.
Periodic payouts at fixed intervals + Single lump sum at maturity or full
Payout Style
maturity benefit + death benefit. sum assured on death.
High – provides regular cash inflows Low – money is locked until
Liquidity
during the term. maturity (no periodic payouts).
Full sum assured + bonuses,
Sum assured + bonuses, paid on
Death Benefit regardless of earlier payouts
death.
received.
Remaining sum assured + bonuses
Full sum assured + bonuses (if
Maturity Benefit (after deducting payouts already
insured survives).
given).
Higher (because of extra survival Lower (than money back for the
Premium
benefits). same sum assured).
People needing periodic funds for
People looking for long-term lump
Best For children’s education, marriage, or
sum savings + life cover.
other milestones.
Moderate (lower cover for same
Moderate (similar to money back,
Risk Coverage premium compared to term
but no interim cash).
insurance).
LIC Money Back 20/25 Years, LIC LIC New Endowment Plan, LIC
Examples
Jeevan Tarun. Jeevan Anand.
• 5. Unit Linked Insurance Plans (ULIPs)
Definition: Insurance + investment plan where part of the premium goes for
life cover and part is invested in equity/debt funds.
Meaning
• A ULIP is a life insurance + investment plan.
• Part of the premium goes towards providing life insurance cover, and the
remaining is invested in market instruments like equity, debt, or
balanced funds.
• Returns depend on market performance (NAV – Net Asset Value of the
chosen fund).
So, ULIP = Insurance + Investment in one package.
Features:
• Market-linked returns (NAV fluctuates with markets).
• Choice of funds (equity, debt, balanced).
• Lock-in period: 5 years.

• Who should buy?: People wanting investment + insurance in one plan.

• Example: HDFC Life Click2Invest ULIP.
• Key Features
• Dual Benefit → Protection (life cover) + Investment (market-
linked returns).
• Flexible Investment Options → Policyholder can choose
funds:
• Equity Fund (high risk, high return),
• Debt Fund (low risk, stable return),
• Balanced Fund (moderate risk).
• Switching Facility → You can switch your investment from one
fund to another (equity to debt, etc.) during the policy term.
• Lock-in Period → Minimum 5 years (as per IRDAI).
• Transparency → Clear breakup of charges, NAV (daily
updated), fund value.
• Tax Benefits → Premiums eligible under Sec 80C; maturity
may be exempt under Sec 10(10D) (if conditions met).
• Charges in ULIPs
• ULIPs usually have multiple charges (deducted from
premium/fund value):
• Premium Allocation Charge (initial deduction from
premium).
• Policy Administration Charge.
• Mortality Charge (for life cover).
• Fund Management Charge (for managing investments).
• Surrender/Discontinuance Charge (if exited before lock-in).
• Benefits of ULIPs
Provides life cover + wealth creation.
Flexibility to choose/switch between funds.
Encourages long-term savings (minimum 5 years).
Disciplined investment since it’s linked with insurance.
Transparency in NAV and charges.

• Limitations
Returns are not guaranteed (market-dependent).
High charges in initial years (though now reduced by IRDAI).
Less liquid (can’t withdraw before 5 years).

ULIP = Market-Linked Investment + Life Cover.

It’s best for long-term financial goals (10–15 years) like wealth
creation, children’s future, or retirement.
ULIP vs Traditional Life Insurance Plans
Aspect ULIP (Unit Linked Insurance Plan) Traditional Plans (Endowment / Money Back)

Nature Insurance + Investment (market-linked) Insurance + Savings (guaranteed or with bonus)

Market dependent (linked to NAV, can be high or
Returns Fixed/low but guaranteed (with declared bonus)
low)
Moderate to High (depends on equity/debt
Risk Very Low (insurance company bears the risk)
allocation)
High – option to switch between equity, debt, or
Flexibility Low – funds are managed only by insurer
balanced funds

Transparency High – NAV published daily, charges disclosed Low – insurer decides investments, less clarity

Liquidity Partial withdrawals allowed after 5-year lock-in Loans may be allowed, but no partial withdrawals

Multiple charges (mortality, admin, fund

Policy Charges Very few charges, mostly hidden in premium
management, premium allocation)

Long-term investors with risk appetite, want Conservative investors who want security + lump
Best For
insurance + wealth creation sum

Maturity Benefit Fund Value (depends on market) Sum Assured + Bonus (guaranteed in nature)

Tax Benefits Premiums: Sec 80C; Maturity: Sec 10(10D)* Premiums: Sec 80C; Maturity: Sec 10(10D)

Example Plans HDFC Click2Invest, ICICI Pru LifeTime Classic LIC New Endowment Plan, LIC Money Back Plan
• ULIP = Market-linked, flexible, growth-oriented (good for
long-term wealth creation).
• Traditional Plans = Safe, stable, guaranteed (good for
risk-averse people).
• 6. Child Insurance Plans
• Definition: Designed to secure child’s future
education/marriage expenses.
• A Child Insurance Plan is a combination of insurance +
investment, designed to secure a child’s future financial needs
such as education, marriage, or other life goals, even if
something happens to the parent (breadwinner).
• It ensures that the child’s dreams continue even if the
parent is not around.
Features:
• Maturity benefits paid when child reaches a certain age.
• If parent dies, future premiums waived but plan continues.
• Who should buy?: Parents planning for children’s future.
• Example: LIC Jeevan Tarun.
• Key Features
• Life Cover for Parent – If the parent dies during the policy term,
the sum assured is paid immediately to the nominee
(child/guardian).
• Waiver of Premium – After the parent’s death, future
premiums are waived, and the insurer continues to invest till
maturity.
• Maturity Benefit – At the end of policy term, the fund value /
sum assured is given to the child for higher education, marriage,
etc.
• Dual Benefit – Provides financial protection (insurance) +
wealth creation (investment/bonus).
• Partial Withdrawal Facility – Allows partial withdrawal during
the term (after lock-in) for school/college fees.
• Tax Benefits – Premiums qualify for deduction under Sec 80C
and maturity may be tax-free under Sec 10(10D).
• Types of Child Insurance Plans
• Child ULIP Plan
• Part of premium provides insurance, rest invested in market
(equity/debt).
• Higher growth potential but market-dependent.
• Example: HDFC Life YoungStar Udaan, ICICI Pru SmartKid.
• Child Endowment Plan
• Traditional plan: Premiums are invested in low-risk instruments.
• Provides guaranteed returns + bonus.
• Safer, but returns are lower compared to ULIPs.
• Example: LIC New Children’s Money Back Plan.
• Child Money-Back Plan
• Provides periodic payouts at important stages of child’s life (e.g., at
age 15, 18, 21).
• Helps meet milestone expenses like school fees, college, higher
studies.
• Benefits of Child Plans
Ensures child’s education/marriage goals are met even if parent is not
alive.
Encourages disciplined long-term savings.
Provides lump sum + periodic benefits.
Waiver of future premiums gives financial relief to the family.
Tax-efficient way of investing for child’s future.
Example Scenario
• A father buys a Child ULIP for 20 years with ₹50,000 annual
premium.
• After 8 years, he passes away.
• Insurer pays sum assured (say ₹10 lakh) immediately.
• Future premiums are waived, but insurer continues to invest for the
remaining 12 years.
• At maturity, the child gets the fund value (say ₹18 lakh) for higher
education.
Comparison of Child Insurance Plans
Aspect Child ULIP Plan Child Endowment Plan Child Money-Back Plan

Nature Insurance + Market-linked Investment Insurance + Savings (with bonus) Insurance + Periodic payouts

Returns Market-dependent (equity/debt funds) Guaranteed + Bonus (safe, low returns) Guaranteed (sum assured + payouts)

Moderate to High (depends on fund

Risk Very Low (insurer bears risk) Very Low (insurer bears risk)
choice)

High – Can switch between equity &

Flexibility Low – Fixed returns only Low – Fixed payout schedule
debt funds

Lump sum at maturity (sum assured + Periodic payouts at key milestones (e.g.,
Payout Structure Lump sum at maturity (fund value)
bonus) age 15, 18, 21) + maturity balance

Available – future premiums waived if

Premium Waiver Available Available
parent dies
Partial withdrawals allowed (after 5 Loan may be allowed, no partial
Liquidity Periodic payouts built-in
years) withdrawal

Parents who want long-term wealth Parents who want safety + guaranteed Parents who want milestone-based
Best For
creation + insurance savings payouts (education stages)

Premiums: Sec 80C; Maturity: Sec Premiums: Sec 80C; Maturity: Sec Premiums: Sec 80C; Maturity: Sec
Tax Benefits
10(10D)* 10(10D) 10(10D)
HDFC Life YoungStar Udaan, ICICI Pru
Example Plans LIC New Children’s Endowment Plan LIC New Children’s Money-Back Plan
SmartKid
•Child ULIP → Best for long-term wealth creation + higher returns (but riskier).
•Child Endowment → Best for conservative parents who want guaranteed savings.
•Child Money-Back → Best for parents who need funds at different education
milestones.
7. Retirement / Pension Plans (Annuity Plans)
• Definition: Provides regular income after retirement.

A Retirement or Pension Plan is a financial product that helps

an individual accumulate savings during working years and
then provides regular income (pension/annuity) after
retirement.
It ensures financial independence when regular salary stops.
• Types:
• Deferred Annuity: Build corpus during working years, pension starts
later.
• Immediate Annuity: Lump sum paid, pension starts immediately.
• Who should buy?: Working professionals planning for old age.
• Example: LIC Jeevan Shanti, ICICI Pru Easy Retirement.
Phases of a Pension Plan
• Accumulation Phase
• You pay premiums (single or regular) during working years.
• The insurer invests these to build a retirement corpus.
• Vesting Age (Retirement Age)
• When the policyholder retires, the accumulated corpus is available.
• A portion can be withdrawn as lump sum (commuted pension)
(usually up to 60% tax-free under Sec 10(10A)).
• The remaining is used to buy an annuity plan for lifetime income.
• Payout Phase (Annuity Phase)
• The insurer pays regular income (monthly, quarterly, half-yearly,
or yearly) to the policyholder.
• This income continues for life (and sometimes for spouse, if joint
annuity chosen).
Types of Pension Plans
• Deferred Annuity
• Regular premiums or lump sum paid during working years.
• Pension starts after a chosen vesting age (say 60).
• Example: LIC Jeevan Nidhi.
• Immediate Annuity
• You pay a lump sum (say ₹10 lakh) and pension starts immediately (from next
month/quarter).
• Example: LIC Jeevan Akshay.
• National Pension System (NPS)
• Government-backed scheme.
• Investment in equity, corporate debt, and govt bonds.
• At retirement, 60% can be withdrawn tax-free, 40% must be used for annuity.
• ULIP-based Pension Plans
• Market-linked returns (like ULIP).
• Build corpus + life cover + flexibility to invest in equity/debt.
• Guaranteed / Traditional Pension Plans
• Insurer invests mainly in debt instruments.
Key Features
• Regular Income after retirement.
• Tax Benefits – Premiums qualify under Sec 80C/80CCD;
partial withdrawals may be tax-free.
• Death Benefit – If the policyholder dies before retirement,
nominee gets sum assured/accumulated fund.
• Annuity Options –
• Pension for lifetime.
• Pension for lifetime + return of purchase price to nominee.
• Joint-life pension (for spouse).
• Example
• Mr. Sharma, 30 years old, invests ₹50,000 annually in a pension
plan for 30 years.
• At 60, he gets a corpus of ₹50 lakh.
• He withdraws 60% (₹30 lakh) tax-free.
• The remaining ₹20 lakh buys an annuity, which pays him
₹12,000/month for life.
A Retirement Pension Plan = Savings during working
years + Regular pension after retirement, ensuring
financial independence in old age.
• 8. Group Life Insurance
Definition: One policy covering a group (employees, association
members).
Group Life Insurance is a single life insurance policy that
covers a group of people (usually employees of a company,
members of an association, or a professional/credit society).

Instead of buying individual policies, the employer/organization

provides life cover to all members under one plan.
• Features:
• Cheaper premiums due to group size.
• Offered as part of employee benefits.
• Who should buy?: Employers, organizations.
• Example: Group Term Life Insurance offered by companies to
employees.
Key Features
• Single Master Policy – One contract covers all members.
• Uniform Coverage – Same or varying coverage based on
salary/position.
• Low Cost – Premium is lower compared to individual policies.
• Automatic Coverage – Members are covered as long as they
remain part of the group.
• No Medical Check-up (usually) – Especially if coverage is up
to a certain limit.
• Term Insurance Basis – Pure protection, generally without
savings component.
• Employer-Paid or Contributory – Premium may be paid fully
by employer or shared with employees.
Types of Group Life Insurance
• Employer-Employee Group Life Insurance
• Provided by companies to employees as part of employee welfare.
• Example: IT companies providing group life cover.
• Non-Employer Group Life Insurance
• Offered by professional associations, cooperative societies, or banks to
their members/customers.
• Example: Group life cover with a bank account or credit card.
• Group Term Life Insurance (most common)
• Provides life cover for a fixed term (usually 1 year, renewable).
• No maturity benefit.
Benefits
• For Employees/Members
• Financial security for family in case of death.
Usually free or low-cost cover.
Easy enrollment, no medical exams.
• For Employers/Organizations
• Improves employee satisfaction & loyalty.
Enhances company’s image as employee-friendly.
Tax benefits on premiums (business expense).

Group Life Insurance = One policy for many members,

usually employer-employee based, low-cost, easy, and provides
basic financial security.
Comparison: Individual Life Insurance vs Group Life Insurance
Aspect Individual Life Insurance Group Life Insurance
A life insurance policy purchased by a person for self A single policy covering a group of people
Meaning
and family protection. (employees, members of association/society).

Policyholder Individual person owns the policy. Employer/association owns the master policy.
Paid by employer/organization, or shared with
Premium Paid fully by the individual.
members.
Chosen by the individual (can be large depending on Usually limited, based on salary/position or fixed
Sum Assured (Coverage)
need & affordability). coverage (lower than individual plans).
Usually not required (automatic coverage for all
Medical Tests Often required, especially for higher cover.
members).
High – person chooses sum assured, policy type, Low – terms decided by employer/insurer;
Flexibility
tenure, riders. employees have little choice.

Duration Long-term (10, 20, 30 years or whole life). Generally short-term (1-year renewable contract).

Portability Remains with individual, even if job changes. Ends when employee leaves the organization/group.

Maturity Benefit Available in endowment, money-back, ULIP plans. Generally not available (mostly term plans).

Cost Higher premium (since tailored for individual). Low premium (risk is spread across group).

Individuals who want long-term, personalized Employers/organizations to provide affordable basic

Best Suited For
financial protection & savings. cover to many people.
• 9. Keyman Insurance
Definition: Life insurance taken by a business on the life of a key
employee.
Meaning
• Keyman Insurance is a type of life insurance policy taken
by a company on the life of a key employee (keyman)
whose death or disability would cause significant financial loss
to the business.
The company is the proposer, premium payer, and beneficiary.
The employee (keyman) is the life insured.

• Features:
• Protects company against financial loss if the key person dies.
• Premium paid by employer, claim amount received by employer.
• Who should buy?: Businesses dependent on few key
• Who is a Keyman?
• A “keyman” is any employee (could be a director, partner, or
highly skilled person) who makes a substantial contribution
to the company’s profits through their skills, knowledge, or
reputation.
• Examples:
• A CEO or MD leading the business.
• A top scientist in a pharma company.
• A celebrity brand ambassador of a company.
• A star salesperson bringing major revenue.
Features
• Ownership – The employer/company owns the policy.
• Life Insured – The key employee.
• Premium Payer – Employer.
• Benefit Receiver – Employer (not the employee’s family).
• Policy Type – Usually a term plan or endowment plan.
Objectives / Uses
• Financial Protection – Compensates the company for loss of profits
due to death/disablement of the keyman.
• Recruitment & Training – Provides funds to hire and train a
replacement.
• Business Continuity – Stabilizes company finances during transition.
• Loan Security – Lenders are reassured since company has insurance
cover on key person.
• Retention Tool – Helps in retaining key employees as their value is
recognized.
• Example
• XYZ Ltd. has a top scientist Dr. Mehta whose research
generates 40% of company’s revenue.
• The company takes a Keyman Insurance Policy of ₹5 crore
on Dr. Mehta’s life.
• If Dr. Mehta dies suddenly, XYZ Ltd. receives ₹5 crore.
• This money helps cover losses, hire a replacement, and
maintain investor confidence.
Difference from Normal Life Insurance
Aspect Keyman Insurance Normal Life Insurance

Policy Owner Company Individual

Beneficiary Company Family/nominee

Protects business from financial Protects family from financial

Objective
loss loss

Premium Paid By Company Individual

Keyman Insurance vs Group Life Insurance
Aspect Keyman Insurance Group Life Insurance

Life insurance taken by a company on the Life insurance covering a group of

Meaning life of a key employee (valuable employees/members under a single
person) whose loss may affect business. policy.

Only specific key person (e.g., CEO, All employees/members of the group
Who is Insured?
scientist, top salesperson). (usually employer-employee group).

Policyholder (Owner) The company. The employer/organization.

Usually the employer; sometimes shared
Premium Paid By The company.
with employees.
Company (to cover financial/business Employees’ families/nominees (to
Beneficiary
loss). cover personal loss).
Business protection against loss of a key Employee welfare and group financial
Purpose
individual. security.

Based on value/importance of key person Standard/fixed or linked to employee’s

Coverage Amount
to business (can be very high). salary/position (usually lower).

Generally none (pure protection for Generally none (mostly term policies for
Maturity Benefit
business). employees).
Ends if the key person leaves the Ends when employee leaves the
Termination
company or policy matures. organization or retires.
Companies highly dependent on a few Employers who want to give basic life
Best Suited For
individuals. cover to many employees.
• 10. Micro Insurance
• Definition: Low premium policies for low-income groups (rural/poor).

• Micro Insurance is a type of insurance product designed for low-

income individuals or economically weaker sections of society.
• It provides protection at a very low premium and offers basic
coverage for life, health, property, or assets.
Purpose: To bring the unorganized sector, rural population, and
poor families under the umbrella of insurance.
Features:
• Small sum assured.
• Affordable premiums.
• Promotes financial inclusion.
• Who should buy?: Low-income households, daily wage earners.
• Example: LIC Micro Insurance Plans.
• Features
• Low Premiums – Affordable for low-income people.
• Small Coverage Amount – Usually covers risks up to ₹50,000
(IRDAI guidelines).
• Simple Terms – Easy to understand, with fewer conditions.
• Flexible Payment – Premiums can be paid weekly, monthly,
or yearly.
• Easy Access – Distributed through NGOs, MFIs (Microfinance
Institutions), SHGs (Self-Help Groups), cooperative societies,
and rural banks.
• Types of Cover – Can be for life, health, crop, livestock, tools,
or hut/house.
• Types of Micro Insurance
• Life Micro Insurance
• Covers death risk of policyholder.
• Small sum assured (₹10,000 – ₹50,000).
• Example: LIC’s Jeevan Mangal Policy.
• Health Micro Insurance
• Covers hospitalization, accidents, or critical illness at low cost.
• Example: Government’s Ayushman Bharat – PMJAY scheme.
• Property / Asset Micro Insurance
• Covers small houses, huts, livestock, or working tools used by poor
families.
• Objectives / Scope
• To protect poor families from financial shocks (illness, death,
crop loss).
• To encourage financial inclusion in rural and unorganized
sectors.
• To provide social security and reduce dependence on
moneylenders.
• To support government’s goal of universal insurance
coverage.
• Benefits
• For Low-Income People
Affordable risk cover.
Protection of life, health, and livelihood.
Helps in emergencies without falling into debt.
• For Society & Economy
Reduces poverty cycle.
Encourages savings habit.
Promotes inclusive growth and social welfare.
• Example
• A farmer takes a Micro Health Insurance policy with an annual
premium of just ₹200.
• The policy covers hospitalization expenses up to ₹30,000.
• If he falls sick and needs treatment, the policy pays hospital bills,
saving his family from debt.
Difference: Micro Insurance vs Normal
Insurance
Aspect Micro Insurance Normal Insurance

Low-income, rural, unorganized Middle & high-income

Target Group
sector individuals, corporates

Premium Very low Higher

Coverage Amount Limited (up to ₹50,000) Higher (lakhs/crores)

Financial inclusion & social Risk protection, investment,

Purpose
protection wealth transfer

Distribution NGOs, MFIs, SHGs, rural banks Agents, brokers, online portals
• Micro Insurance = Small premium, small cover, big
protection for low-income people. It is a tool for
poverty reduction, social security, and financial
inclusion.