Comparing Traditional Life Insurance Products in the Indian Market: A Consumer Perspective

Rajagopalan, R (2005) Comparing Traditional Life Insurance Products in the Indian Market: A Consumer Perspective. TAPMI, Manipal.

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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: • ‘Traditional’ products consisting of term insurance, endowment and whole life policies • ‘Modern’ products which are unit-linked life insurance policies where the investment risk 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 consumer perspective: • Which type of the traditional insurance product should I buy? • Which insurance company’s product should I buy? • Is it better to save through insurance policies or through the widely available taxadvantaged Public Provident Fund (PPF)? We use an expected present value approach, data on mortality rates, current market premiums and interest rates for the comparison within and across policy types. We conclude as follows: • Shopping around will save a lot of money for an insurance buyer • Term insurance should be the primary choice for insurance protection • PPF is likely to be a better savings option than buying endowment or whole life policies We propose to follow this paper with a similar comparative evaluation of unit-linked policies.

Item Type:	TAPMI Working Papers
Uncontrolled Keywords:	Life Insurance Products; Indian Market; Consumer Perspective
Subjects:	Finance Finance > Banking Services
Divisions:	Operations and Information Science
Depositing User:	Ms. Vanitha K
Date Deposited:	16 Nov 2018 10:16
Last Modified:	21 Nov 2018 04:13
URI:	http://tapmi.informaticsglobal.com/id/eprint/347

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