Some term insurance plans offer return of almost the entire paid premium. But in the case of pure term insurance, you gain nothing if you survive the period. Which plan is better?
Prakash Raj, Patna
The premium for a pure risk policy (without the refund of premium) is equal to the mortality charges that the insurance company must recover. Hence, if the insurance company has to return the premium at the end of the term, it must recover something over and above the mortality charges. The excess money recovered as premium is invested and at the end of the term is returned to the insured after deducting management expenses. Effectively, the insurance company takes extra money from you and returns the same to you at the end of the term. If you invest the same amount yourself, in all probability, you will make more money than just the return of premium.
