Till some time back traditional investment linked insurance plans were quite popular. Then came the unit linked plans that offered market linked growth as well as insurance. Yet for many the traditional endowment plans and money back plans are the best bet. What makes them so attractive? There are a few things that no other investment plan can beat.
Traditional plans have been in the market for long and with time they have gained the trust of people as safe savings plans. They help save substantial amount over the time systematically. The return is guaranteed and income fixed at the time of Maturity
In a Traditional Plan
the insurance company guarantees a fixed return value. Investment Risk
is borne by the insurance company and not by the Insured
unlike a ULIP where the investment risk is borne by the Policy
holder. Here it becomes imperative for the insurance company to safeguard the customer’s interest.
Besides the fixed amount there are guaranteed additions and bonuses announced by the company from time to time. These are for the participating policies where the company shares its growth with the customers. So it becomes insurance company’s responsibility to invest the money such that the interests of the company as well as the policy holder are protected.
Being an insurance product, it is more of an insurance plan than an investment one. The returns are secure and mentioned in the document. It serves the protection purpose of insurance better than any other investment. The customer interest is always protected. For a passive investor who is not so keen on identifying the right funds for investment, these are ideal. The insurance company makes sure that the money is invested rightly.
Comparing endowment plans and money back plans
, endowment plans suit people who cannot spare much money for investments owing to other priorities but may need money at some point of time. Money back policies are more suitable products for life stage planning where the money is required at specific stages in life.
Traditional investment plans have the dual advantage. They ensure guaranteed returns and long Term
fixed duration protection. Most of all these plans fit the mindset of systematic saving for future.