Term insurance plus separate investment – a financially prudent choice over endowment assurance – a prospective product design aimed at influencing stakeholder behaviour and thereby contributing to sustainable growth & development: a study based in India

Abstract: Life Assurance is a form of risk management used to hedge against the risk of loss of life. Thus, it should not be confused with investment, although it often is. As a result, plans that come with the combined benefit of insurance and investment (endowment assurance plans) are extremely popular. But people buying such plans don’t understand that they are not getting the best of both worlds by buying a hybrid product (that combines assurance with investment). Instead, they end up getting a product that is neither a good investment, nor a good assurance. The purpose of this study is to formulate a methodology for evaluating returns on endowment assurance policies and to locate potential alternatives to investment in an endowment assurance policy for maximizing the return on investment along with the assurance of a better life cover. The study also sheds light on the long term macroeconomic implications of investment in an endowment assurance policy vis-à-vis the proposed alternatives. Finally, it recommends measures that can be undertaken to unleash the true potential of life insurance sector in contributing to the country’s economic growth & development in a manner in which pursuit of private gain by all the individual stakeholders can lead to social good by ensuring that scare resources of the country is utilized in the most efficient possible manner