The insurance sector in India is growing vastly, and the people look forward to the different life insurance plans designed to suit their needs. The basic requirement of any Indian is getting the corpus, and undoubtedly, no other option than investing in the market is available apart from the bank FDs and government schemes.
Understanding the customer’ needs, the insurance companies in India have introduced savings and investment plans that allow them to accrue the corpus over the period of time and fulfil the financial goals along with availing the insurance cover. Initially, the savings and investment plans were designed considering the people who have low and moderate risk appetite. But, as the demand is grown up, the companies were obliged to introduce more aggressive plans with some modifications in the policies. In short, in today’s date, there are two types of savings and investment life insurance plans that are most popular among the customers, which are as follows. Endowment Plans When the savings and investment concept was new in the insurance market, the insurance companies introduced the savings and investment plans focusing the people having moderate or less risk hunger. These were called the endowment plans, which were affordable, but on the other hand, provide average returns. Initially, most of the people aren’t aware of the investment market and its operations; thus, the insurers kept the functioning of the endowment plans very clean and simple. In such traditional plans, you need to pay the premiums for the sum assured and the tenure you choose. Further, the company invests your money into several bonds and market-linked products from which you can get additional returns apart from the sum assured. The funds where money is invested are not visible or accessible by the policyholders. ULIPs There are three types of people having low, moderate and high risk-hunger. For the first two, endowment plans were the best suitable; however, for those who wanted sizeable corpus at the end of the tenure, the insurers had to introduce something bigger. Here, the customer is willing to invest in the riskier investment instruments such as equities. Thus, to fulfil the needs of the customers, the insurance companies introduced the savings and investment plans with aggressive investment options. These are nothing but the Init Linked Insurance Plans or ULIPs. Here, the policyholder can choose the funds where he wants to invest his money and also switch between the funds within the tenure considering the market volatility. Both the savings and investment plans offer guaranteed maturity and death benefits, but the additional corpus and the risk associated to it differs. Analyse your needs, determine the risk appetite and choose an apt plan.
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August 2022
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