NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products
Mr. Iyer, aged 40, has a home loan outstanding of Rs 60 lakh reducing over 15 years and wants a life cover that automatically falls in line with the reducing loan balance at the lowest cost. Which product best suits this need?
Decreasing term assurance is the best fit because its sum assured falls over the term, matching the reducing home loan balance. As a pure protection product it is cheaper than whole life or endowment plans, and it avoids paying for unnecessary cover as the loan shrinks.
- AWhole life policy with level sum assured
- BDecreasing term assurance (mortgage reduction cover)Correct
- CEndowment policy with profits
- DIncreasing term assurance
Explanation
Decreasing term cover has a sum assured that reduces over time, mirroring an amortising loan, and it is a pure protection plan so premium is low. Whole life and endowment carry savings elements and cost more. Increasing term cover moves opposite to the loan balance.
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