Globally, the persistency ratio for the 13th month is almost 90 percent. The 13th-month persistency of the Life Insurance Corporation of India (LIC), for instance, was about 63 percent in 2022 – meaning 37 in 100 policies lapsed within the first 13 months. It also underscores the low persistency rates for life insurance policies in India. This case (a fictional account) illustrates the journey of many low-income households (LIHs) with traditional life insurance products. They are disappointed and frustrated about losing their hard-earned savings but are unable to continue paying for the policy.Īlso read: Why traditional life insurance policies aren't great long-term investments This was not disclosed to them at the time of purchase. With no other financial recourse, the couple decides to surrender the plan to pay for hospital expenses.īut they realise that surrendering the plan after five years would fetch them only about Rs 24,000, and the insurance company would retain the rest as a penalty for pre-closure. The couple is persuaded to buy the plan, partly because it seems to offer a pathway for long-term savings and partly because the relative is urging them to do so.Īfter paying a total premium of about Rs 45,000 over five years, a health shock in the family puts the household’s finances under severe strain. It also provides a life insurance cover of Rs 1 lakh. In return, the plan promises an assured sum of Rs 1 lakh and a bonus of up to Rs 32,400 at the end of the policy term. They earn Rs 3 lakh annually from running an auto and a door-front petty shop.Ī relative, an insurance agent, comes to them with an endowment plan where they would have to pay a monthly premium of Rs 738 over 20 years. Priyadarshini Ganesan and Sowmini G PrasadĪ couple lives in Kumbakonam village in Tamil Nadu with their two children.
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