Page 42 - IC23 life insurance application

per thousand for a money back plan, where 20% of the sum assured is paid at the

end of 5 years, 10 years and 15 years and the balance 40% is paid at the end of 20

years. Thus the levy of Rs.15/- per thousand per annum is for receiving a part of the

money in advance. A money back plans of 20 years can be looked at as if it is a

combination of several pure endowment plans of small sum assureds maturing at 5

years, 10 years, 15 years & then at 20 years, along with a term assurance plan for

the full sum assured covering the entire term of 20 years.

Basically insurance is only a term assurance policy when sum assured is payable

only on death during a specified period. The factors which compute this premium are

only mortality, and expenses. There is no savings, no bonus loading. Hence this is

the cheapest mode of policy. A Temporary Term Assurance Policy (Table 43 ) is

available for a maximum period of 2 years only and that too with a single premium.

The single premium for a person aged 30, for a two year term, per thousand is

Rs.6.00 only. In India, such policies for more than 7 year period are not offered, may

be because reliable information regarding personal health is not easily available and

therefore a lot of moral hazard is involved.

On the other hand, in a Convertible Term Assurance policy Table 58, which is

essentially a term assurance policy as Table 43, the annual premium for a person

aged 30, for a term of 7 years, which is maximum permissible, is Rs.5.50 per annum.

This plan has the added privilege of being converted into an endowment plan at the

end of the period without undergoing any medical examination. One has to pay the

additional premium depending upon the term and plan chosen.

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