What To Consider When Choosing Between Endowment, Money Back Plans & ULIP
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When investors look to buy life insurance, factors like sum assures, payments of premiums and duration of the payment are all taken into consideration. Various financial products allow investors to choose a policy that best covers their needs. However, it comes down to a matter of awareness. With products like endowment, money-back plans and ULIPs, it can certainly be a task to accurately differentiate between these products.
However, these financial products allow investors various advantages based on their choices. After all, the choices made by investors are a matter of their risk-taking appetite as well as their financial goals. Since opting for these plans require regular premium payment, financial responsibility needs to be exercised when looking to invest in these products.
What are ULIPs?
Unit Linked Insurance Plans or ULIP is a financial product made available to investors looking to avail the benefits of an insurance policy along with the creation of wealth although the investment aspect of this policy. Additionally, the benefits of tax savings may also be leveraged.
Unit Linked Insurance Plan provides investors with the freedom of investing in equities, debt or a mix of both. Thereby allowing investors to invest based on their risk-taking ability and financial goals.
What are the benefits of Unit Linked Insurance Plans?
The Investment options provided by Unit Linked Insurance Plans give investors a certain degree of freedom by allowing them to choose the investment part of the Unit Linked Insurance Plan
A great deal of transparency is ensured when investing in Unit Linked Insurance Plans. With annual and quarterly reports outlining the investment portfolio and the NAV, investors remain well equipped with information.
Tax saving benefits can be availed by investors of the Unit Linked Insurance Plan scheme as stated by the income tax act.
What are Money Back Plans?
Money-back insurance plans provide policyholders with insurance coverage, in addition to regular payouts called ‘survival benefits’. This is ideal for investors looking for both insurance and regular payouts ensuring guaranteed returns. These ‘survival benefits’ are paid out during the lifetime of the policy. The frequency of which differs from provider to provider.
This allows policyholders to enjoy liquidity provided by the ‘survival benefits’ allowing them to invest the same into a different venue, in addition to providing a financial safety net in times of uncertainty. Policyholders also get the option of adding riders to their plans in case they require a cover for specific events.
What are the Key Features of Money Back Plans?
1. With regular payments to the policyholders, one can expect improved liquidity allowing them a higher degree of financial freedom.
2. Guaranteed returns on investment.
3. Returns on the maturity of the scheme. A sum assured amount is paid to the investor on policy maturity, much like an insurance cover.
What are Endowment Plans?
Endowment plans are certainly a very popular financial product leveraged by many. It combines the twin advantage of having an investment and a life cover, much like a ULIP. However, the difference arises when looking at the money got on maturity. That is, investing in an endowment plan entitles investors to get a sum assured amount, which is usually given with a bonus amount provided at the time of maturity.
This helps policyhoders with additional liquidity when it comes to expenses associated with their child’s education, marriage or even the purchase of a house.
What are the key Features of Endowment Plans?
1. Provides life cover to the policyholder. It ensures payment of a death benefit to the nominee in case of the death of the policy holder.
2. Benefits are provided to the policyholder on maturity.
3. A tax benefit is provided to the policyholder on their premiums. That is, the policyholder is entitled to tax benefits under the Income-tax act.
Key Takeaways
With various financial products in the market, it becomes increasingly difficult to choose a product that best suits the customer’s needs. That said, with all the information made available at the click of a button, getting information is certainly not a challenge. That said, when it comes to choosing an investment plan or insurance, it is always recommended to go through factors like terms and guidelines, sum assured provided, frequency of payment of benefits if any, bonuses provided at the time of tenure ends if any, and so on.
Hence, when looking to invest in Unit Linked Insurance Plans, Endowment plans or money-back plans, it becomes important for investors to do their homework, to ensure no unpleasant surprises occur, and they get the best out of their plan. Happy investing!
Also read: The Most Up-to-Date Endowment Policy Trends You Should Be Aware Of
