Question

Compare the difference between traditional and nontraditional life insurance products by explaining the financial disintermediary. Explain thoroughly please.

Answer 1

Traditional Life Insurance is the Policy which is like Endowment plan, Money Back, Pension plan etc where you take the policy and the insurance company will pay you yearly bonus and Sum assured at the end of Policy term or on the death of the policyholder. It will provide risk-free fixed amount at end of the policy. I do not have high or low investment return and assured death benefit to the nominee. But in traditional life insurance, the policyholder can not change premium amount after starting of policy.

Non-Traditional Policy is the ones where the customer is given a choice to invest their funds in various Mutual funds and get the returns as per there investment funds and performance of the fund. Here risk of fund performance will borrow by the investor and not company. Additional investment is allowed any time in the existing fund. Here higher risk higher expected return.