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Loss of a life cannot be compensated for and this is the basis of
Life Insurance products. Other products such as medical insurance would
reimburse an individual for an expense incurred by the respective person
in case of medical mishap. However, the value of life of a person cannot
be reimbursed and hence all Life Insurance products work upon the basis
of paying an amount (also known as sum assured) in an unfortunate
incident of death based upon an initial agreement between the insurer
and the insured person. The amount of premium paid by the insured
depends upon various factors such age, existing medical ailments,
lifestyle of the insured, duration and amount of insurance. If the
amount of insurance requested by the insured is over a material amount,
the insurance provider may require a medical checkup before entering
into an agreement with the insured.
Amongst the types of life insurance products available in the financial
market, the most popular options are Term Insurance and Endowment
Policy.
In Term Insurance policy, the insured person pays a regular insurance
premium for the duration of the insurance policy and if the insured dies
during the tenure of the policy, the lump sum amount / sum assured is
paid to the nominee / legal heir of the insured. If such an event does
not arise with the policy term, no amount is paid by the insurance
company to the insured.
In case of Endowment Policy, similar to term insurance, the insured
person pays a regular insurance premium for the duration of the
insurance policy. During this duration, the insured person is covered if
a death event occurs, whereby the sum assured amount is paid by the
insurance company to the nominee or the legal heir of the insured
person. However, if no such event arises, the insured person is paid the
sum assured after the expiry of the policy tenure. Several flavors of
endowment policies exist where such sum assured is paid throughout the
policy duration (in case of money back policies), or where the insured
pays insurance premiums for a specific duration only and gets a life
cover for an extended period of time. Other policies invest a portion of
insurance premiums in stock markets and aim to generate higher return
and hence a higher maturity payout (in case of Unit Linked Insurance
Plans). In summary Endowment Policy plans serve dual purpose of
providing insurance and acting as an investment option in the same time.
In the maze of several types of insurance products available through
scores of insurance companies, BFA assist their clients to obtain the
right product to suit their requirements.
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