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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products

Ravi, aged 35, buys a 20-year endowment policy. He pays an annual premium of Rs 50,000 and the sum assured is Rs 10,00,000. He dies at the end of year 8 after paying all premiums due. Ignoring bonuses, what does the nominee receive as the death benefit?

The nominee receives Rs 10,00,000, the full sum assured. An endowment policy that is in force pays the sum assured on death during the term, irrespective of how many premiums have been paid. Bonuses would be extra, but none are assumed.

  1. ARs 4,00,000, being total premiums paid
  2. BRs 10,00,000, being the sum assuredCorrect
  3. CRs 6,00,000, being the sum assured less premiums paid
  4. DRs 5,00,000, being half the sum assured

Explanation

An endowment policy pays the full sum assured on death during the term, provided the policy is in force. Bonuses would be added on top, but none are assumed here. Premiums paid (8 x 50,000 = Rs 4,00,000) are not the benefit measure.

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