Answer to Question #258694 in Marketing for Falak

Question

Ashwini wants to buy a pure risk life insurance cover of rs.1.5 crore he is confused whether he should buy ULIP a term plan.Recommend the product best suited for his requirement.

Answer 1

Discussion

While people usually can't prevent the unexpected from happening, sometimes they can get some protection. Insurance is meant to safeguard people, at least financially, should certain things happen. But there are numerous insurance options, and many financial experts will say it’s good to have them all. It can be difficult to determine what insurance one really needs. Purchasing the right type and amount of insurance is always determined by one’s specific situation.

In this case, where Ashwini wants to buy a pure risk life insurance cover; Term Life Insurance cover would be the best. Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.

When one buys a term life insurance policy, the insurance company determines the premiums based on the policy's value (the pay-out amount), age, gender, and health of the individual. In some cases, a medical exam may be required. The insurance company may also inquire about an individual’s driving record, current medications, smoking status, occupation, hobbies, and family history.

If the individual dies during the policy term, the insurer will pay the policy's face value to their beneficiaries. This cash benefit which is, in most cases, not taxable may be used by beneficiaries to settle the individual’s healthcare and funeral costs, consumer debt, or mortgage debt, among other things. However, if the policy expires before death, there is no pay-out. One may be able to renew a term policy at its expiration, but the premiums will be recalculated for their age at the time of renewal. Term life is usually the least costly life insurance available because it offers a benefit for a restricted time and provides only a death benefit. 

Reference

Keogh, L. A., & Otlowski, M. F. (2013). Life insurance and genetic test results: a mutation carrier's fight to achieve full cover. Medical Journal of Australia, 199(5), 363-366.