Insurance as a word is not unheard, even in the hinterlands of the country. As a concept whether people understand its meaning is a debate which needs a lot of deliberation. Let us focus our discussion on Life Insurance to start with. Most of the people purchase life insurance products for Tax saving and few understand that it’s a cover for life. Second highest category is of the customers are in for investments and somehow buy this product given the first point that we mentioned. Children education, marriages, retirement etc. are also some of the reasons that have been seen empirically. There are two types of Life Insurance Plan: Term plan and traditional plans. Traditional Plans are those which have saving component and risk component. These plans are liked by people but CAGR of these plans around 6%. Among term plans, we have a bifurcation into:
- Pure Term Insurance Plan
- Term Insurance With Return Of Premium
- Pure Term Insurance Plan: A form of life insurance where the insured is covered for a specific term during which if he passes away, the sum assured is payable to the nominee. If the death doesn’t happen, nothing is payable at the maturity of the policy. This plan is the most effective plan to insure life and is very cost efficient.
- Term Insurance with Return of Premium: As the name suggests, the premium is returned in case the insured is alive at the maturity of the policy. Of course, if the insured passes away while the coverage continues, the sum assured is payable to the nominee.