Q1. I am 40 years old and work in the private sector. An insurance agent contacted me recently to sell a life insurance product. Some of my friends also bought life insurance policies and explained the different features and benefits of a policy. However, I am still in doubt about which one to choose. Could you explain the difference between endowment and money-back policies and how they work?

Ans. Endowment policies primarily focus on providing a lump sum payout at the end of the policy term or upon the death of the life assured, catering to long-term savings and financial protection needs. Money-back policies, on the other hand, offer periodic lumpsum payouts during the policy term, meeting both savings and liquidity needs. So, while endowment plans offer a larger sum at maturity, money-back plans provide periodic returns, ensuring liquidity at regular intervals. The choice would depend on your preference for lump sum or periodic returns of the policy would depend on your financial goals or requirements of the family.  

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Q2. I am 50 years old and self-employed. On the advice of one of my associates, I bought a life insurance policy about 10 years ago when I was working in a remote location. Recently, on returning home in Mumbai, I spoke with an insurance agent who pointed out some drawbacks regarding the policy coverage. He asked me if I wanted to buy another company’s life insurance policy. Would you recommend purchasing a new policy? What are my options?

Ans. Considering your age and self-employment status, it’s wise to review your insurance needs. You can assess your current policy and review the drawbacks highlighted by the agent. Determine if they significantly impact the insurance coverage. Evaluate your needs considering your financial situation and obligations towards the family. Additionally, you can compare options from different life insurers based on coverage, claim settlement ratio, policy features, and the financial stability being offered. You can also consider endorsing your policy under the Married Women’s Property Act (MWPA) and enhancing coverage through add-on options like disability benefit or critical illness benefit riders.

The author is the head of products and segments at HDFC Life.