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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Comparison of Products Across Categories

Caselet: Ms. Nair, aged 40, wants to compare pure term insurance with an endowment plan for her family's protection need. She asks about the key difference in how the two products serve her goals. Which statement is correct?

Term insurance provides pure risk cover at a low premium, while an endowment plan combines cover with a savings component and therefore costs more for the same sum assured. Hence term is more efficient for protection, and investments can be made separately.

  1. ATerm insurance gives pure risk cover at a low premium, whereas an endowment plan bundles cover with a savings element at a higher premium for the same sum assuredCorrect
  2. BEndowment plans give higher cover per rupee of premium than term insurance
  3. CTerm insurance always returns all premiums at maturity
  4. DEndowment plans have no death benefit

Explanation

Term plans are pure protection with low premiums; endowment plans combine protection with savings, so premiums are much higher for the same cover. Return of premium is only a feature of a specific variant, not all term plans. Endowment plans do pay a death benefit.

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