Bonfring International Journal of Industrial Engineering and Management Science
Online ISSN: 2277-5056 | Print ISSN: 2250-1096 | Frequency: 4 Issues/Year
Impact Factor: 0.541 | International Scientific Indexing(ISI) calculate based on International Citation Report(ICR)
Comparing Traditional Life Insurance Products in the Indian Market: A Consumer Perspective
Abstract:
Life insurance policies are valuable assets to mitigate the financial risk of untimely death. As such, every individual facing such a financial risk who can afford to pay for such a protection must seriously consider purchasing some life insurance. In the current Indian market, this choice is difficult on three counts: Inherent complexity due to uncertainty and long time horizons. The need to compare a plethora of different types of products from competing insurance companies. Most insurance policies bundle pure insurance with savings to offer composite products. There are two broad types of life insurance policies available in the Indian market: i. Traditional products consisting of Term Insurance, Endowment and Whole Life Policies ii. 'Modern' products, which are unit-linked life insurance policies where the investment risks is borne by the policyholder. This paper is an attempt at a comparative evaluation of the Traditional Insurance Policies available in the Indian Market from a consumers perspective: i. Which type of traditional insurance product should I buy? ii. Which insurance companys product should I buy? iii. Is it better to save through insurance policies or through the widely available tax-advantaged Public Provident Fund (PPF)? We use an expected present value approach, data on mortality rates, currently prevailing premiums on insurance policies and interest rates- for the comparison within and across policy types. We conclude as follows: i. Shopping around will save a lot of money for an insurance buyer ii. Term insurance should be the primary choice for insurance protection iii. PPF is likely to be a better savings option than buying endowment or whole life policies.
Keywords: Policyholder, Traditional Insurance Policies, Indian market, Insurance Regulatory and Development Authority, Endowment Policy
Volume: 1 | Issue: Inaugural Special Issue
Pages: 01-04
Issue Date: December , 2011
DOI: 10.9756/BIJIEMS.1001
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