Life insurance is a contract between you and an insurance company.
You pay premiums (monthly/ quarterly / half yearly or yearly), and in return, the company pays a lump-sum benefit to your chosen beneficiaries if you pass away while the policy is active.

Its main purpose: financial protection for your family or dependents.

Why People Get Life Insurance

· Replace lost income for family members

· Cover funeral or medical expenses

· Pay off debts (mortgage, loans, credit cards)

· Support children's education

· Leave an inheritance or estate plan

· Business protection (e.g., key-person insurance)

Types of Life Insurance:

1- Term insurance

2- Pension plan

3- Money back plan

4- Endowment plan

5- Children education & marriage plan

6- ULIP (Unit Linked Insurance Plan)

7- Single premium plans

8- Mahila (Women) special guarantee plan

Tax Benefits under Life insurance

1. Tax Benefit on Premiums (Section 80C)

· The premiums you pay for a life insurance policy (including term insurance, endowment, ULIP, etc.) are eligible for tax deduction.

· Maximum deduction: ₹1,50,000 per year

· Available for:

o Self

o Spouse

o Children (dependent or independent)

Conditions

· For policies issued before 1 April 2012 → Premium should not exceed 20% of the sum assured.

· For policies issued on or after 1 April 2012 → Premium should not exceed 10% of the sum assured.

· For policies on disabled dependents u/s 80U or 80DDB → Premium limit is 15% of sum assured.

✅ 2. Tax-Free Maturity Proceeds (Section 10(10D))

The maturity amount, survival benefits, and bonuses from life insurance policies are fully tax-free.

Exceptions — When maturity is not tax-free

Maturity amount is taxable if:

· Premium exceeds 10% (or 15%) of sum assured

· For ULIPs issued after 1 Feb 2021, if:

o Premium of single ULIP > ₹2.5 lakh, OR

o Combined premium of all ULIPs > ₹2.5 lakh per year

Term insurance death benefits are always 100% tax-free.

✅ 3. Tax Benefit on Pension/Annuity Plans (Section 80CCC)

Premiums paid to certain pension plans like LIC Jeevan Akshay, Jeevan Nidhi, etc., qualify under:

· Section 80CCC → Included in the same ₹1,50,000 limit of 80C.

 Summary