"After getting into various small endowment and money-back insurance policies really early in life, I decided not to go take any more of these," says Vijaylakshmi Raghavan, the 29-year-old Branch Head of Sun F&C, Bangalore, speaking as a customer.

Why? Simply because she felt that she was paying much too much, by way of premium, with very little to show in terms of actual protection cover that these policies gave. In other words, she had done exactly what most Indians have been doing all these years: buying insurance as an investment. On six policies, she was paying Rs 10,800 per annum, but getting life-cover for just Rs 1.6 lakh.

In short, she's over-invested and under-insured. Yes, she saves on tax, thanks to Section 88, 80D, and 10 (10D) of the Income Tax Act. Yes, endowment is a means of forced savings (like a provident fund is). And yes, she's supposed to get fat returns when her policies eventually mature (if inflation doesn't end up eating into it). But that's not a safety cushion for her dependents, is it?

Raghavan has now decided to be clear about it. Insurance is a safety device that pools risks and thus provides a cushion against an unforeseen calamity. This primary function does not cost much. So this year, she is buying only risk-protection products- from three different insurers. Premium payout: about Rs 5,000. The sum assured: Rs 15 lakh.

That doesn't mean that newer insurers are cheaper. It just means she is putting her money on what she genuinely values. Protection. As for investments, there are myriad other options in India along a broad risk-return spectrum. "I should be saving enough on my own and investing that smartly," says Raghavan, "so I don't need an endowment product."

Pure Life Play

Pure life products are ideal for either those who can't afford the hefty premium on an endowment policy, or those who're financially savvy enough to build their own investment portfolio. Now, pure insurance products were always available in India, and at good prices too. But since insurance agents get a cut of the premium, their incentive has always been to push the endowment schemes-which don't just say "we'll cover you", they say "we'll invest your money".

If competition in the market has made one big difference already, it is in the arena of information dispersal. Today, the focus is shifting to the consumer's actual needs. You can get what you want, not what's being sold. And what you may want is the choice to let your insurer do what it is best qualified for: insuring your life. Plain and simple.

Strangely, this has not translated into a bonanza for private insurers. "While the awareness in the insurance market has gone up tremendously, the willingness to buy hasn't kept pace," says Pankaj Seth, Head (Marketing), HDFC Standard Life Insurance Company. People still shy away from insurance, a must-have in any financial planning exercise.

Part of the reason could simply be the cultural taboo on entertaining thoughts of premature demise (the reason, say some agents, that selling endowment schemes is so much easier). Yet, detached rationalism is sorely needed. India remains heavily under-insured, despite the plentiful product availability. "We have products from pure insurance to almost pure savings with a slight insurance component," says Seth.

The other reason that private insurers have yet to tap the enormous potential is the fact that they're so new to India, and must still work hard to instill trust in their brands (an experiential word-of-mouth issue, mostly). Will these brands be around when they're needed? What if their investments go bad?

The regulator, IRDA, has taken due care to ensure the soundness of new insurers. But as a policy-buyer, you should independently examine your insurer's investment philosophy (what it does with your premium payments), and analyse it for yourself. If safety is your basic need, then go for an insurer that believes in building a portfolio of safe assets (long-term government bonds, for example).

In uncertain times such as these, an insurance policy should act as a safety cushion that comes as close to infallibility as financially possible (these days, there's much scepticism surrounding our investment institutions). This can happen when the consumer base also turns acutely safety-conscious. As in, "Never mind the big returns, just be around to do your basic duty, okay?"

The good news: there are signs that pure life policies are gaining ground rapidly in India, as more and more people adopt Raghavan's reasoning. The Union Budget's move to cut the tax breaks on insurance (restored, since) has hastened the adoption of pure life products, too.

Even Life Insurance Corporation, with its army of endowment-pushing agents, is now responding to the changing market dynamics with a no-frills policy, Anmol Jeevan, which is being advertised over the the heads of its agents.

This has forced agents to give people details of pure life offerings. Others in the fray include Max New York Life, which was an early mover in flying the 'safety' banner, HDFC Standard Life, which followed suit, and ICICI Prudential, which has been keener on selling endowment policies but has recently started marketing pure life policies as well.

How Much Cover?

It depends on how much will be needed by the family to get by, in the sad event of the policy-holder's death. If it's a main-earner, then maintaining the same lifestyle can be quite a big task. Yet, a pure life policy makes it accessible. "Ideally," says Saugata Gupta, Chief Marketing Officer, ICICI Prudential Life Insurance Co, "a person should take a cover of 10 times his or her annual income." As income goes up over the career-span, so should the cover.

Take Raghavan's case. She plans to take the pure risk cover up to Rs 25 lakh by the end of this year, to match her current income, and then keep adding to it over the years. And, best of all, it's costing her less than what her earlier policies did.

The only trouble is: it's not pleasing to think that you (your family, rather) will get benefits only if you, ER, how to put it-die. What if you're critically ill?

Ah, that's where the so-called 'riders' come in. Many value-added policies have assured sums in case of 'dread diseases', for example. "Pure life protection is an ideal product to start off with a risk cover," says Gupta. You could also look at a pure cover to guard loans and assets, like a housing loan (in case of death of the insured, the loan would be repaid by the sum insured).

The point is: be clear about your needs. That done, get yourself exactly what you want. Not what's being thrust at you.