Types of Life Insurance, Explained Simply
Some plans only protect, some protect and save. Here is what each type pays and when.
Life insurance comes in a handful of basic types. Some only protect (they pay if the person dies), some protect and save (they also pay if the person survives), and some are mainly for retirement income. Almost every plan sold in India is one of these, or a mix.
This page explains each type in a few lines so you can tell them apart. Follow the links for the types that have their own detailed page.
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How IRDAI groups life products
The 2024 Insurance Products Regulations sort every life product in two steps. Product names in the market are built on top of this.
Non-linked
Split into
Par (with profits) or non-par
What it means
Benefits are not tied to market-linked funds. Par plans share in the insurer's surplus through bonuses; non-par plans pay only what is fixed at the start.
Linked
Split into
Unit linked or index linked
What it means
Benefits depend on the performance of funds (ULIP) or on a public index. All linked products are non-par.
Either group
Split into
Individual or group
What it means
A product is sold to one person, or to a group such as employees under a master policy.
| Group | Split into | What it means |
|---|---|---|
| Non-linked | Par (with profits) or non-par | Benefits are not tied to market-linked funds. Par plans share in the insurer's surplus through bonuses; non-par plans pay only what is fixed at the start. |
| Linked | Unit linked or index linked | Benefits depend on the performance of funds (ULIP) or on a public index. All linked products are non-par. |
| Either group | Individual or group | A product is sold to one person, or to a group such as employees under a master policy. |
The main types, one by one
- Term insurance
- Pure protection for a fixed period. If the life assured dies within the term, the nominee gets the sum assured. If the person survives, nothing is paid. IRDAI calls these pure risk products: no savings element. Lowest premium for a given sum assured.
- Whole life insurance
- Cover for the whole of life, or at least up to age 80. A claim is certain to arise one day, so premiums are higher than term. Detailed on the whole life page.
- Endowment policy
- Pays the sum assured on death within the term, or a maturity amount if the person survives to the end. Protection plus planned saving. Detailed on the endowment page.
- Money back policy
- A form of endowment that pays parts of the sum assured at set intervals during the term (survival benefits), with the balance at maturity. On death within the term, the death benefit stated in the policy is paid; check the policy terms for how earlier instalments are treated.
- ULIP (unit linked insurance plan)
- Premium, after charges, buys units in funds the policyholder chooses. Fund value moves with the market. Carries a five-year lock-in. Detailed on the ULIP page.
- Pension and annuity plans
- Built for retirement. A deferred pension plan builds a corpus during working years; an annuity then pays a regular income for life or a set period. An immediate annuity starts paying soon after a lump sum is paid.
- Group insurance
- One master policy covers many members, for example an employer's group term cover for staff. Each member gets a certificate of insurance.
What each type pays
Term
On death in the term
Sum assured
On survival
Nothing
Savings element
No
Whole life
On death in the term
Sum assured (plus bonus if par)
On survival
No fixed maturity
Savings element
Yes
Endowment
On death in the term
Sum assured (plus bonus if par)
On survival
Maturity amount
Savings element
Yes
Money back
On death in the term
Death benefit as per policy
On survival
Instalments, then balance at maturity
Savings element
Yes
ULIP
On death in the term
As per the plan's death benefit option
On survival
Fund value
Savings element
Yes, market-linked
Pension / annuity
On death in the term
Depends on the option chosen
On survival
Regular income
Savings element
Yes
| Type | On death in the term | On survival | Savings element |
|---|---|---|---|
| Term | Sum assured | Nothing | No |
| Whole life | Sum assured (plus bonus if par) | No fixed maturity | Yes |
| Endowment | Sum assured (plus bonus if par) | Maturity amount | Yes |
| Money back | Death benefit as per policy | Instalments, then balance at maturity | Yes |
| ULIP | As per the plan's death benefit option | Fund value | Yes, market-linked |
| Pension / annuity | Depends on the option chosen | Regular income | Yes |
Insurance principles and agent duties in the IC-38 style. No signup.
Riders are add-ons, not types
Accidental death benefit, critical illness and waiver of premium are riders: extra covers attached to a base policy for extra premium. A question that lists a rider among "types of life insurance" is testing whether you know the difference.
How the exam tests this
IC-38 product questions are mostly "which plan fits this customer" or "which plan pays on survival". The common trap is picking whole life or endowment for a young earner whose stated need is maximum cover at the lowest cost. That need points to term insurance. The other trap is assuming term insurance pays something at the end of the term; a pure term plan pays nothing on survival.
Learn the "what each type pays" table above until you can fill it from memory. Most product questions are that table in disguise.
FAQs
What are the different types of life insurance?expand_more
The main types are term, whole life, endowment, money back, unit linked (ULIP) and pension or annuity plans. Under IRDAI's 2024 rules each is either linked or non-linked, and non-linked plans are either par or non-par.
Which type of life insurance gives the most cover for the lowest premium?expand_more
Term insurance, because it has no savings element and pays only if death happens within the term. It is a pure risk product in IRDAI's terms.
Which life insurance policies pay money if I survive?expand_more
Endowment, money back, ULIP and pension plans pay on survival. Pure term plans do not. Whole life pays on death whenever it happens, not at a fixed maturity date.
Is a rider a type of life insurance?expand_more
No. A rider is an optional add-on to a base policy, such as accidental death benefit, bought for extra premium.
Access exam-specific mock tests directly from your Android device.Next steps
- Whole Life Insurancearrow_forward
- ULIParrow_forward
- Endowment Planarrow_forward
- Life vs General vs Healtharrow_forward
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