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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Meera, aged 35, has a spouse and two young children and wants the highest life cover for the lowest premium, purely to protect her family's income if she dies during the next 25 years. Which product best suits this need?

A pure term insurance plan is the best fit. It pays a sum assured only if death occurs during the term and carries no savings element, so premium per rupee of cover is lowest. Endowment and money-back plans cost more for the same cover, and annuities do not protect against early death.

  1. APure term insurance planCorrect
  2. BEndowment plan
  3. CMoney-back plan
  4. DSingle premium annuity plan

Explanation

A pure term plan pays the sum assured only on death within the term and has no savings component, so it gives the highest cover per rupee of premium. Endowment and money-back plans bundle savings and cost more for the same cover. An annuity provides income to a living person and gives no death protection of this sort.

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