Appeal

Major sources of appeal of the new genre of products that emerged world wide are
i.Direct linkage with the investment gains
ii.Inflation beating returns
iii.Flexibility
iv.Surrender value

The Shifts

a.Unbundling : This trend involves separation of the protection and savings elements

b.Investment Linkage: The shift towards investment linked products, which linked benefits with an index of investment performance.

c. Transparency : Greater visibility in the rate of return and in the charges made by the companies for their services(like expenses etc)

d.Non - standard products : The fourth major trend has been a shift from rigid to flexible product structures, which is also seen as a move towards non- standard products. 

Life Insurance Products

Non Traditional Life Insurance Products : Purpose & Need

• These products have often been considered as being part of the financial market and compared with other instruments of capital accumulation.
• Purpose of savings and investing  is to achieve inter-temporal allocation  of resources, which is both efficient and effective.
• Inter - Temporal allocation means allocation across time.Traditional Cash value plans have been called "Bundled Plans' as their structure is bundled and presented as single package of benefits and premium

Limitations of Traditional Plans:

a.Cash value Component: The savings or cash value component in traditional insurance policies is not well defined.

IRDA's new Guidelines for traditional products

According to the guidelines, the product design of traditional plans would remain almost the same.

New Traditional products wil have a higher death cover

i)For single premium policies it will be 125% of the single premium for those below 45 years and 110% of single premium for those above 45 years.

ii)For regular premium policies, the cover will be 10 times the annualized premium paid for those below 45 and seven times for others.

Premium / Age	<45 years	>45 Years
Single Premium	125% of Premium	110% of Premium
Regular Premium	10 Times of Premium	7 Times of Premium

The minimum death benefit in case of traditional plan is at least the amount of sum assured and the additional benefits (if any)

In addition to the sum assured, the bonus / additional benefits as specified in the policy and accrued till date  of death shall become payable on death if not paid earlier

These plans would continue to come in two variants, participating and non participating plans. 

Variants of Endowment Assurance Plans

Money Back Plan:

It is typically an endowment plan with the provision for return of a part of the sum assured in periodic installments during the term and balance of the sum assured at the end of the term.

Par and Non-Par schemes:

It is also known as participating and non-participating policies.

The term "Par" implies policies which are participating in the profits of the life insurer. "Non-Par" on the other hand represent policies which do not participate in the profits. Both  kinds are present in the traditional life insurance.

Par schemes: Policyholders are either guaranteed a part of growth or get a share of surplus from investments by insurers. These plans have higher premiums. profits are payable as reversionary bonuses or dividends. Apart from this, life insurer may also declare Terminal Bonuses(not guaranteed)

Non Par: Benefits are fixed and guaranteed at the time of contract