How does life insurance provide both protection and investment benefit?

Dear Student,

The life insurance provides dual benefits, it provides security to the beneficiary of the insured and also acts as an instrument of long term savings. Such policies are known as money back or endowment policies.

In return of regular payment of premium amount, the insurance company, protects the insured, for a specified period of time. That is, incase of death of insured, the insurance company will pay a lump sum amount (already agreed at the time of contract) to the nominee/ beneficiary of the insured.

In case the insured survives, he gets back the premium paid along with a bonus. This amount is either paid periodically or at the maturity of insurance policy.

This is how life insurance protects against loss of life and acts as a saving instrument.


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