Pensions and Annuties

Difference between Life Insurance Products and Pension Products:

Life Insurance Products	Pension Products
Purpose of Product : Life Insurance products have been designed basically to provide protection against the financial consequences of an individual’s early and premature death	Pension products provide protection against the financial consequences that may arise when the individual lives too long and thus outlives one’s financial resources
Contingency covered: In case of life insurance, the basic contingency covered is that of mortality	In case of pensions it is postretirement income discontinuity
Product structure: In the case of life insurance, a stream of premium payments results in creation of a capital sum, known as the sum assured. This sum is payable to the individual’s nominees or beneficiaries in the event of death of the individual, or may be paid as a survival benefit at the end of the term in the case of endowment policies.	In the case of pensions, a capital sum, which we may call a corpus or total consideration gets liquidated in part or whole through its conversion into a stream of regular income payments . These are known as annuities