Plans allow systematic enhancement of wealth with insurance
If you are thinking to save your money for the future endeavors and have considered life insurance as one of the ways, you are on the right track as putting some of your bucks in life insurance Policy will not only protect you in case of a calamity but it will also help you to utilize your money at the required time period of your life.
Your agent may not suggest the best insurance plan for you and to increase his profit margin he may sell you what he wants to. In order to safeguard your money and utilize it in your interest you need to do a little bit of research on the topic.
Let us see what kinds of insurance plans are available in the market and which one suits you the best:
Endowment plans are the traditional insurance plans in which the Insured person puts his money to protect his Dependants at the time of his demise that is, Death Benefit within the policy period and if the Policyholder survives the policy term, he is entitled to get sum Assured in addition to accrued Bonus and additional bonus (subject to company’s profitability).
This Term stands for the policy in which the insured gets the proportion of the Sum Assured through periodic payments at fixed intervals of the policy. In case of policyholder’s death, sum assured plus the accrued profit is paid to the nominee.
ULIP is the short form of unit linked insurance plan which is bought for insurance as well as for investment purpose. ULIP serves as an investment plan policyholder wherein part of Premium amount is invested into mutual funds, stocks or debt where the money grows and rest is used to provide protection through insurance. The investment returns are as per the ratio of investment in various financial instruments.
Next is the difference in features of the three insurance plans. Let’s have a look to see which one suits the best:
Endowment plan and money back plan are life insurance products and provide investment option in it, as the amount is invested as per insurer’s choice in government securities and other fixed return financial instruments.
While ULIP is an investment plan and policyholder puts a part of his cash into insurance services, a part is charged as investment fees and the remaining amount of cash is invested in the debt/equity ratio. And for the same reason, the profits earned may vary person to person and rates of return are market linked.
Under endowment plans, accumulated bonus plus sum assured is paid to the policyholder during Maturity or to the nominee in case of natural death and double sum assured plus bonus accumulated is paid in case of accidental death.
When it comes to money back plan, sum assured is paid to the policyholder through periodical payments and in case of death, sum assured plus bonus is paid to the nominee without deducting any amount that was paid to the policyholder as a periodical payment.
Under ULIP the sum assured is either the value of net assets in which the fund is allocated or the sum insured chosen at the time of purchasing the ULIP whichever is higher.
Your choice of insurance depends largely on your affordability and Risk taking capability. If you want fixed returns, you should buy endowment plan. In case you want parts of your fund to be utilized at various stages of your life, go for money back policy. Otherwise, those who are ready to take some risk as well as desire good returns on their funds can go for unit linked insurance plans.