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Endowment and investment life insurance: pros and cons

In the field of life insurance, India ranks tenth in the world. India's share was 2.73% of the global life insurance market in 2021. Life insurance premium in India increased by 9.63% compared to the previous year, while the global market grew by only 1.18%. The Zee Business publication compares endowment and investment life insurance
Endowment and investment life insurance: pros and cons

The ULIP plan is a combination of investment and insurance. The policyholder is required to pay a monthly or annual premium under this plan. Part of the premium is used for life insurance, while the rest is invested in financial instruments such as mutual funds. The ULIP plan allows you to invest in a variety of funds while giving you insurance coverage.

Benefits of Unit Linked Insurance

The Unit Linked Insurance plan can give you higher returns than other insurance policies because it allows you to invest in a variety of financial instruments. The ULIP plan has many pros. Let's look at some of them:

The ULIP plan is a combination of life insurance and investment. It ensures the financial security of the investor's family in the event of his untimely death. Moreover, it also provides you with a great return on investment.

The investment component under the Unit Linked Insurance Plan is exposed to market risk. And ULIP allows you to invest in a fund of your choice based on your risk tolerance and financial goals.

The ULIP plan is a good investment option as it helps you build a large reserve in a given amount of time. The income you earn can be used to meet your long-term goals, including a house or car purchase, your child’s education, and planning for retirement.

This plan is designed so that you can switch your investments between equity and debt capital according to your requirements. The ULIP plan does not oblige the investor to invest in any particular option. The investor enjoys the freedom to choose investment options according to his risk profile.

The Unit Linked Insurance plan usually has a fixed period of 5 years because the investment requires a certain minimum period to make a profit. You can withdraw funds after the blocking period. Make sure you are aware of the policy lockout period.

Benefits of endowment life insurance

Endowment life insurance is something between a piggy bank and insurance in the usual sense of the word. The insurance company in any case will return the contributions that a person pays, either to himself or to the beneficiary (for example, a spouse or child). On top of this, a small return will be paid, since the IC has not been just keeping this money but has invested it for the purpose of obtaining a profit.

Firstly, the client decides on the program duration, insurance coverage and premiums. Two following options are available here:

  • You know how much you need by a certain date (e.g. you are retiring in 10 years and you decide to move to a country house for which you need to save a certain amount; therefore, your goal is several million rupees in 10 years). Your insurance agent will calculate the necessary amount of premiums for this;
  • You do not have a specific goal, but you know how much it will be comfortable for you to pay for insurance. Then your insurance agent will calculate how much you will receive at the time of the agreement termination.

When these details are determined and the endowment life insurance contract is concluded, the insured makes regular contributions throughout the entire period. The policy is typically valid for 5-40 years (or even for life), and premiums can be paid on a monthly, quarterly or annually basis.

The amount of premiums can be increased if the client has diseases that increase the risk of death (liver cirrhosis, oncology, or heart disease). A complete list of diseases taken into account in this case should be checked with the insurance agent. But if the health problem is detected after the endowment agreement conclusion, this does not affect the validity of the policy in any way.

If the person lives safely until the termination of the contract, the life insurance company pays out the full amount of the premiums made, plus return. If a person passes, his beneficiaries or heirs receive the entire insurance coverage, regardless of the number of premiums.


Photos are from open sources.

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