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Life Insurance Features, Meaning, Importance & How to Choose the Policy

A life insurance plan is a product you may consider when you plan your finances. A life insurance policy may help you in ensuring that your family has the financial support to rely on in case you lose your life. Before buying any financial product, it is essential to note the features it has. Read further to know the common features of life insurance.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Tailored Life Insurance Solutions for your long-term Life Goals.

Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins


Important Features of Life Insurance


You may find the characteristics of life insurance plans very simple to understand. Here are its prominent features:

1. Issued in the name of the policyholder

A policyholder may be considered an individual or an entity that purchases a life insurance plan. A policyholder may be an individual, a family, or even a business, depending on the type of policy purchased.

2. Premium Payment Options

One of the main components of life insurance plan is the premium payable to the insurer. You may choose the premium cycle and payment method from the available options, based on your convenience. You can choose from several payment options to pay premiums to your insurance provider.

3. Selecting the Suitable Sum Assured

A sum assured can be considered to be the amount the nominee receives in case the life assured loses their life during the policy term. The life insurance company pays the sum assured to the nominee in the event of the passing away of the life assured during the policy term, as per the terms and conditions of the plan. The sum assured needs to be selected carefully, since it is one of the important factors of life insurance. You may need to consider the financial needs of your loved ones and any liabilities that they may have while choosing the amount of sum assured.

4. Option of Choosing the Tenure

The policy term is the duration for which the policy remains active. The policy term may range from a few years to several decades. You may choose your plan’s duration based on your financial goals and family needs. The policy term needs to be selected suitably, since it may be directly linked to your family's financial security. You may consider your remaining employment years, debts or liabilities, if any, the financial status of dependents, etc. while determining the tenure.

5. Selecting a Nominee of Choice

A nominee is a person who may receive the policy benefits in case the life assured loses their life during the policy tenure. The policyholder may nominate one or more nominees, in accordance with Section 39 of the Insurance Act, 1938 to receive the underlying benefits of the life insurance policy, in the event of your untimely demise within the policy tenure. Hence, it is one of the essential features of life insurance that needs to be selected carefully.

6. Maturity Benefits

The maturity benefit is the amount the policyholder draws at the time of policy maturity. This amount may be predetermined at the time of purchasing the life insurance plan (as per the product type) or it may vary based on the investment value (in case of ULIPs). Also depending on the type of the policy, it may consist of bonus (if any) declared by the insurer.

7. Claim settlement

The nominee can initiate the claim settlement process to receive the sum assured from the life insurance provider if the life assured loses their life during the policy term. The claim process requires the nominee to submit all the required documents to receive the benefit under the policy.

8. Optional Riders

Some life insurance plans come with add-on riders that offer financial benefits over and above those offered under the base plan. These riders can be opted for by paying a nominal additional premium.


Why Having a Life Insurance Policy Is Important?


Once you are aware of some important features of life insurance, you may wonder whether you need to buy one.

Read on to understand why life insurance may be important for you:

1. Financial Security of Your Loved Ones

Having a life insurance plan may ensure that, in your absence, your family may not have to struggle financially. In case of your sudden demise, your dependents may find themselves in a vulnerable place. During this time, the death benefit that they receive may be crucial in ensuring that they are financially covered.

2. Protection Against Critical Illnesses

As healthcare costs may continue to skyrocket, it may be important to have a plan in place to cover critical illnesses such as heart attacks, cancer, etc. These types of illnesses may cause a significant financial burden and may prevent you from earning income while you recover. Life insurance with a critical illness rider may help you during such difficult times.

3. Achievement of Your Child's Goals

As a parent, you may want to plan ahead for your child’s future needs, including providing for their education, marriage or other goals. In case you lose your life, your life insurance plan may help in offering a sufficient corpus to take care of your child's financial needs.

4. Secure Retirement

Retirement might be a major milestone for some and may require careful financial planning to ensure a comfortable and stress-free life post-retirement. After you stop working, it might be crucial to accumulate enough funds to support your lifestyle. Having a life insurance plan with an investment or saving component may allow you to build a retirement corpus while securing your family financially.


Factors to consider before buying a Life Insurance Policy


When buying a life insurance policy, you should consider all relevant features to know which type of policy would suit your needs. These factors include the following –

1. Financial goals

Firstly, consider your financial goals for which you are buying the policy. Your goals would help you pick the suitable type of plan. For instance,

  • If you need to create a corpus for your children’s future, a child insurance plan may be considered
  • If you want financial security for your family in your absence, a term plan may be suitable
  • For creating a retirement corpus, pension plans may be a suitable choice
  • For investment-oriented market-linked returns, you may consider Unit Linked Insurance Plans (ULIPs)


So, assess your needs, and coverage requirements and then pick the suitable plan.

2. Investment horizon

Next, consider your investment horizon, i.e., for how long you can invest for your goals. This helps in choosing the suitable policy tenure. For instance, if you want to create an education corpus for your child who is just a year old, you may choose a policy tenure of 15 to 20 years.

3. Risk appetite

Risk appetite means your ability to take risks. Life insurance plans are available both as traditional plans which offer guaranteed* returns, some like ULIPs where the returns are linked to the market performance, etc. Depending on your risk appetite, you can choose a suitable policy. For instance, if you don’t want to take risks, endowment or money-back plans would be a better choice but if you don’t mind risks, you may consider buying ULIPs.

4. Corpus needed

Assess the corpus needed for the financial goal for which you are buying the life insurance policy. This would help you choose a suitable sum assured or the premium payable (in the case of ULIPs). Choose a plan that will help you create an optimal corpus so that your financial goals can be met.

5. Benefit structure

Understand the benefit structure of the policy that you are buying to know what to expect from the policy. For instance, know the death benefit, maturity benefit, money-back benefit, bonus, guaranteed additions, etc. which the plan might offer.

6. Coverage and exclusions

Lastly, understand what is covered under the life insurance plan and what is not. This would inform you about the claims that the policy would pay and the ones it would not.

Assess these factors and then choose the most suitable life insurance policy for your coverage needs.


How to Buy the suitable Life Insurance Plan?


Buying life insurance may be an important decision that requires careful consideration. Here is a step-by-step guide that may help you purchase the suitable life insurance policy:

1. Assess your Needs

You may start by assessing your financial goals and needs. You may consider factors such as your age, income, liabilities, and dependents. Being aware of your needs may help you determine life cover you require. You may also use tools like a life insurance calculator to get a better estimate of your coverage needs.

2. Research Thoroughly

Since there are several types of life insurance plans catering to different needs, you may want to explore different options before narrowing down your choice. You may also consider the premium amount, policy features, riders, and the insurance company’s goodwill before going ahead with the purchase.

3. Compare Different Plans

After doing your research, you may have shortlisted a few plans that you are considering buying. You can compare different aspects of these plans to find the suitable one for you. You may use online comparison tools or consult an insurance advisor to help you make an informed decision.

4. Apply for The Policy

Once you've selected a policy, you may fill out the application form, also known as proposal form and submit the necessary documents, online or offline. Choose the suitable premium payment term and frequency. The insurance provider will evaluate your application and may ask for additional information, if required.

5. Make premium Payment

The premium amount may be paid annually, bi-annually, quarterly or monthly, depending on the policy type and the insurer.

Choosing a life insurance plan that suits your financial goals and requirements may be important. Ensure that you read the fine print and are aware of the terms and conditions of your life insurance plan before going ahead with the purchase.


Frequently Asked Questions about Life Insurance and its features


1. What are some of the common types of life insurance?

Term insurance, whole life insurance, money-back insurance, Unit Linked Insurance Plan (ULIP), endowment plan, retirement plan, and child insurance plan are some of the common types of life insurance plans.

2. Can I buy life insurance riders without buying a base policy?

Riders are the additional benefits that you may be able to add to your base life insurance plan by paying an additional nominal premium. Thus, you may need to purchase a basic life insurance policy in the first place to add a rider. After you purchase a life insurance policy, you may get to choose the riders you wish to purchase. They may be considered add-on benefits to your base plan.

3. Will I get a return when my life insurance policy matures?

The benefits received on maturity of a life insurance policy if the life assured survives the policy term, are considered as maturity benefits. The feature of maturity benefit may depend on the type of policy you have purchased. For example, a pure term insurance plan may not have maturity benefits, while ULIP may have them.

4. How long does my life insurance plan last?

A life insurance plan lasts for the tenure you select while buying the plan. The policy will stay in force, as long as you pay all due premiums on time.

5. How many riders can I add to my life insurance policy?

You may add one or all the riders from those offered by your life insurance provider under the particular product. However, note that for each rider that you add to your plan, you may have to pay an additional nominal premium.

Generic References:



Plus Symbol
Minus Symbol

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

*The Guaranteed benefits are dependent on the policy terms, sum assured, premium and age along with other variable factors. For more details please refer to sales brochure.

IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs. The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on carefully before concluding a sale.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 


*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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