The hike in service tax rate has increased the cost of life insurance and will surely reduce the overall return in traditional plans, which are a combination of insurance cover and saving element coupled with tax benefits.
Traditional insurance plans are easily sold. Previously, only LIC was pushing these products. Now private insurance companies have also aggressively launched many traditional plans in the last few years. Traditional plans are neither insurance plans in the true sense of the term as they offer a limited sum assured, nor investment products since they are unlikely to beat inflation.