The unique combination of mutual fund investments, debt market and life insurance coverage has always attracted investors towards various UL plans. These plans also help invest in long-term goals like property purchase, retirement or higher education for children. Additionally, the waiver of premium (WOP) feature allows ULIPs to meet long-term investment goals even in case of unforeseen events like the untimely death of the policyholder.
Vivek Jain, Head of Investments at Policybazaar.com says, “In case of the policyholder’s untimely death, the company will pay the insurance coverage and return on investment.”
Why a life insurance plan is insufficient?
There is a common misconception that mixing investment objectives and insurance coverage makes UL an undesirable option as it is very expensive and risky.
“One should have life insurance coverage. People in India, however, often do not realize that the payout from a life insurer should cover all funeral expenses and the family’s future. So, many buy low-cost insurance, whereas someone who makes well, needs at least two policies,” notes Vivek Jain.
The choice of UL comes with various documents, products and obligations making the structure difficult for an investor to understand. “UL forms about 1.5% of the life insurance market. However, such policies in India return 15% on average to their owners. Many plans provide returns of up to 22%,” the speaker cites statistics.
Photo is from open sources.