Page 40 - IC23 life insurance application
P. 40
Therefore, the cost relating to mortality is present in all plans and therefore does not
influence the relative cost. But it does influence the cost, when double or triple sum
assured is payable on death. For example, in an ordinary endowment plan say table
14 a single sum assured is payable either on death or on survival. But in case of a
Jeevan Mitra plan (table 88) double sum assured becomes payable on death. For
example, a prospect age 30, for a 20 year plan, has to pay under ordinary
endowment plan annual premium of 51.50 per thousand, but the same person
under a Jeevan Mitra plan for the same term shall pay Rs.55.20 per thousand
annually. Thus this extra cost (Rs.55.20 - 51.50) of Rs.3.70 represents the cost for
mortality factor which has been added twice in Jeevan Mitra, but only once in
ordinary endowment. This cost due to mortality factor is not substantial compared to
the total cost. Therefore a good agent should encourage an young proponent to go
for risk oriented plans which are comparatively cheaper to savings oriented plan,
which are relatively expensive.
Consider the cost of a double endowment plan (Table 18) without profit where
double the sum assured is paid on survival in comparison to a single endowment
plan without profit (Table 11). Under Table 11 (without profit endowment plan) an
young man of 30 years taking a term of 20 years has to pay Rs.33.20 per annum
per thousand while the same person taking a double endowment plan for 20 years
has to pay Rs.57.65 per thousand per annum. The difference in premium is Rs.27.45
which is almost 80% in excess of the single endowment. In fact the impact of the
survival benefit at a young age is overwhelming compared to the mortality factor. In
double endowment plan, mortality factor i.e. age, is completely ignored. However
please note that both the plans taken here are without profit plans.
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