The Investment Plans offer return on premiums paid besides offering coverage for the life insured at the same time. Life Insurance products offer both these benefits. The investment plans can be Unit Linked Insurance Plans (ULIPs) or Traditional Endowment Plans or Money Back Plans.
The decision to why a specific investment plans will vary depending upon the objective which can be long term, short term, event specific such as Education of Child, Marriage of the Child, Buying a house, Retirement planning, building a corpus etc.
The investment plans also comes with additional riders such as waiver of premium etc. and also offer benefits under section 80C of the Income Tax Act, 1961.
A Child Plan is one, which offers financial security for the education of your child. These are designed in such a way that their education expenses are taken care of even in your absence. A corpus is built which over a period of time thru the premiums paid and the maturity benefits are linked with critical stages of child’s higher education or for schooling expenses in the form of monthly / annual payouts.
A child plan should be bought immediately on child’s berth so that you get maximum time to build corpus for the stated objective. This is one of the best gifts that one can make for his/her child and even the Grand Parents can buy this plan for their grand children.
Waiver of Premium rider is also available under different plans.
Pension plans are also known as Retirement Plans under which your savings get accumulated over a period of time and provide you regular income retirement / chosen period. A regular investment for a long period of time grows manifold owing to compounding factor. The premium amount will depend upon how much monthly amount you would need at the retirement age and hence inflation should also be accounted for while decided the premium. However, pension plans can be bought in phases and linked with career growth.
Under Unit Linked Insurance Plans, the premiums so paid are invested into the stock market under various funds such as Debt funds, Equity Funds, Balanced Funds etc. depending upon risk appetite. As the premium is invested into the stock market, the risk component here is higher compared to traditional plans such as Endowment Plans / Money Back Plans. The value of debt fund / equity fund is evaluated in the form of Net Asset Value (NAV) of the fund. At any given point of time, you can check the NAV of your plans and see for yourself in terms of how your investment is behaving.
As this is slightly riskier form of insurance, the returns can and generally are higher than those under traditional plans. The key here is to monitor your fund on regular basis / key event happening (economy related) and switch between debt / equity fund etc. so that investment is remain safe and returns are optimized. Second important aspect under ULIPs is to stay invested for longer period as short-term investment in stock market may adversely affect your investment.
The investment made in ULIPs are liquid to the extent that once the lock-in period is over, you can withdraw the money at any time.
Money back plans are one of the most popular plans in the country. Under these plans, besides life cover benefit, frequent / regular payouts are made to the policyholder. Money back plans score over Endowment plans if you are looking for regular payments unlike lump-sum benefit at the maturity of the policy. However, in case of the death of policyholder, the nominee gets the sum assured along with accrued bonuses and policy gets terminated and no further regular payments are made. These are therefore called survival benefits.
Money back plans are one form of guaranteed plans as you get fixed secured amount and your investment remains totally safe. The other significant factor here is that you get the benefits of the policy during your life term on regular basis, whichcan take care of large expenses.
Endowment Plans are the most traditional life insurance products where cover is for a specific period. Upon the occurrence of death of insured, the nominee gets the sum assured plus bonuses accrued to the policy. One can choose endowment plan between Participatory Plans and Non Participatory Plans.
Under non-participatory plans, the survival benefit / terminal benefit is the sum assured under the policy.
Under participatory plans, besides sum assured, the policy participates in the profits of the company and returns can be higher.
Reversionary Bonus: This is the additional bonus payable to Life Insured / Nominee for Participatory plans. Once this bonus has been a made, it can’t be withdrawn.
Terminal Bonus: This is the discretionary amount, which is added to payments made on maturity of the policy or on death of the life insured.
Cancer and Heart Attack are probably two of the most common major illnesses that we are witnessing in the society. If we look around in our social / business circle, very easily we will find out that these two diseases have presence like never before and its increasing with passage of time.
Not only these diseases are critical illnesses but the related treatment is highly expensive and normal health plans are not at all sufficient to provide for financial costs attached to these treatments.
Hence, insurance companies have designed plans specifically to manage the risk arising out of these two diseases. The compensation is paid on diagnosis itself so to cover for medical costs and treatment and plan still continues for policy tenure / full payout, as the case may be. Riders such as waiver of premium, payout for minor conditions, increasing cover benefit etc. can also be opted for.
These plans are relatively cheaper and best advised to avail these covers.