Abstract
Human life is the most important asset and life insurance is the prominent type of insurance that provides financial protection to an individual and his family at the time of uncertain risks/damage. Apart from providing safety & protection to individuals’ life insurance also encourages savings among people. The present exploratory and descriptive study was selected to identify the role of life insurance in human lives and also analyze the profitability aspects of a traditional/conventional and ULIP policy. Also, the investment mechanism of the life insurance fund created by collecting the premium from the insured by the insurer is analyzed. The data for the study has been collected from secondary sources. The study also shows that the insurers have maintained at all times a prescribed minimum level of solvency as a protection to the policyholder’s legitimate interest concerning the investment mechanism of life insurance. The study regarding the profitability aspects of a traditional ULIP policy shows that the choice depends on an individual’s financial goals, needs, and appetite. For a passive investor who does not want to take risks and looks for secured returns and more tax-saving instruments, traditional insurance could be a good asset. Whereas people who look for investments are willing to take risks & expect more returns, a combination of traditional policy, equity, and mutual fund in the investment portfolio (ie. ULIP policy), would be better as it will fetch better returns, balance your wealth and diversify the risk.
Keywords: Life Insurance, Insurance Policy, Traditional / Conventional Policy, Investment Mechanism, Life Insurance Fund, Equity, Debt, NAV.
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