NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products
Which feature best distinguishes a pure term insurance plan from a traditional endowment plan?
A pure term plan pays the sum assured only if the life assured dies within the policy term, and pays nothing on survival. Because there is no savings element, its premium is far lower than an endowment plan with the same cover.
- ATerm plan pays the sum assured only on death during the policy term, with no maturity benefit in the pure formCorrect
- BTerm plan always pays a guaranteed bonus every year
- CTerm plan premium is always higher than an endowment plan for the same sum assured
- DTerm plan has a surrender value equal to all premiums paid
Explanation
Pure term cover is protection only: the sum assured is paid on death within the term and nothing is paid on survival. Premiums are much lower than endowment for the same cover, and it has no bonus or meaningful surrender value.
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