NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products
Caselet: Mr. Rao, 35, wants a policy that pays a lump sum to his family if he dies during the next 25 years and has no maturity benefit, at the lowest cost. Which product best fits this need?
A pure term insurance plan fits best, because it pays the sum assured only if death occurs within the term and has no maturity benefit. With no savings component, it offers the highest cover at the lowest premium compared with endowment, money-back or whole life policies.
- AMoney-back policy
- BEndowment policy
- CPure term insurance planCorrect
- DWhole life participating policy
Explanation
A pure term plan pays the sum assured only on death within the term and has no survival benefit, which makes it the cheapest way to buy large cover. Endowment, money-back and whole life policies include savings or survival components and cost more.
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