Academic journal article Researchers World

Why Should One Invest in a Life Insurance Product? an Empirical Study

Academic journal article Researchers World

Why Should One Invest in a Life Insurance Product? an Empirical Study

Article excerpt

ABSTRACT

Life insurance as a product is always one of the toughest to sell. Though one can argue about its benefits in the long term, in this modern materialistic world, customers are getting very cautious about their investments and the returns out of it. In this study, an attempt was made to make the customers aware of various aspects of a life insurance product and their respective opinions regarding the policy. Various demographic characteristics of the policy holders e.g. age, gender, income, education, occupation etc. and their impact on the customers' perceptions regarding the product were explored. The various aspects involved in a life insurance product as per their importance to the policy holders can be outlined as: A tax saving plan; a saving scheme with good return; financial security for the family; Risk coverage; Save for green patch (Pension), to cover the risk of living too long; and, to make black money in to white. The study focused on two life insurers: LIC and HDFC Life Insurance operating in Rajasthan. A sample size of 215 life insurance customers was planned. The data was collected through primary sources through a structured questionnaire. Data was analyzed using SPSS 17.0 and MS Excel - 2007. ANOVA and t-Test were used to examine the differences among various groups of respondents. Though the study was handicapped by limited sample size (both geographical as well as periodical), it can be amplified as per the national scenario with some specific modifications. This study will help the insurance companies and the regulators in developing a better life insurance product.

Keywords: Investment, LIC, Life Insurance, Rajasthan.

INTRODUCTION:

Financial services are playing a major role in the Indian economy. One of the premium sectors in the financial service sector showing upward growth is insurancei, which is a US$ 41-billion industry in India. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, whereas in developed nations like the USA about 75 % of the total population is covered under some insurance schemeii. The penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the immense growth potential of the insurance sector.iii With more and more private companies in the sector, the situation may change soon. India is the fifth largest life insurance ivmarket in the emerging insurance economies globally and is growing at 32-34 per cent annually. Many a people associate life insurance product with death and not as a tool of investment. A healthy and developing insurance sector is of vital importance to every modern economy. First as it encourages the savings habit, second because it provides a safety net to rural and urban enterprises and productive individuals. Further, it generates long-term funds for infrastructure development. The insurance industry plays a significant role in India's modern economy. Insurance is necessary to protect enterprises against risks such as fire and natural disasters. Individuals require insurance services in such areas as health care, life, property and pension. Development of insurance is therefore necessary to support continued economic transformation. Social security and pension reforms also benefit from a mature insurance industry. Needs identified with life insurance are as followsv: 1. Protection: savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. 2. Aid to thrift: life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. 3. Liquidity: in case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. …

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