Terms, bonus, sum assured: Making sense of life insurance policies

Insurers' products are complex; investors must have a rational expectation about the returns they will get

mental health

Life insurance maturity proceeds are exempt from tax only if the death benefit is at least the annual/single premium. (FIle photo)

Deepesh Raghaw
An investor forwarded me a traditional life insurance product and asked me whether he should invest in it. I had to evaluate purely from the point of view of returns or suitability as a fixed income investment. The investor didn’t need life cover.

Breaking down a life insurance product is not easy. There are so many terms, bonuses, loyalty additions, sums assured and much more. There is a play on the timing of payments, too.

I wondered why these plans are so complex and what could have the insurance company done to make it easier for the investor to decide on his own (especially if the investor is assessing the suitability purely as an investment product)?

First Published: Sep 21 2023 | 4:51 PM IST

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