Terms, bonus, sum assured: Making sense of life insurance policies

Insurers' products are complex; investors must have a rational expectation about the returns they will get

An investor forwarded me a traditional life insurance product and asked me whether he should invest in it. I had to evaluate purely from the point of view of returns or suitability as a fixed income investment. The investor didn’t need life cover.

Breaking down a life insurance product is not easy. There are so many terms, bonuses, loyalty additions, sums assured and much more. There is a play on the timing of payments, too.

I wondered why these plans are so complex and what could have the insurance company done to make it easier for the investor to decide