Skip to main content

When to choose traditional insurance policies and when ULIPs

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

 

CHOOSING the right life insurance product is not easy. It requires careful thought and consideration, and, a thorough evaluation of your present financial circumstances and your requirements in the future.

Life insurance products are broadly categorised into traditional and unit linked (most commonly equity-linked) products. The difference between traditional and equity-linked products depends on whether the investment risk is borne by the insurer or by the customer. In simple terms, a traditional product is where the premiums are invested by the insurer (as per the regulatory investment guidelines) and the customer gets certain guaranteed and non-guaranteed benefits for paying and non-guaranteed benefit premiums. In unit-linked products, the customer chooses (from a list of available funds), the investment option, and, his/her premiums are allocated after deducting charges. The value of these invested funds could then go up or down depending on the performance of the underlying investment (typically equity shares), and this risk is borne the customer and not the insurance company.

So, how does one decide which product is more suitable? Before buying, it is important that you review your financial plan.

One should note that the core objective of buying insurance is protection of the family in unfortunate circumstances. Whichever type of product you choose, first ensure that the level of protection is in line with your requirements, that is, your income, number of dependents and age. In both traditional and unit-linked products, you can tailor the protection level by choosing the appropriate sum assured and add-on protection riders. Once your family protection is assured, we can set out some general guidelines.


Are you comfortable with investment risk?


The past experience of investment returns suggests that equity investments have the potential to deliver superior returns over a longer period of time. In the interim, however, your investment value will go up or down. Higher the investment risk, higher the potential reward. Hence, if you are looking for longer-term gains, and have the risk appetite of being comfortable with your investment values moving on a daily basis, go for equity-linked products. Traditional products, typically, invest a limited (regulated) percentage in equity and, hence, the potential returns are lower.


Do you need your investment to provide a minimum guaranteed return? Traditional products will, typically, guarantee the payment of the `sum assured' on maturity or in the unfortunate event of death of the insured. For equity-linked products, if you have the choice of equity investments, then, there is no guarantee of return or protection of the invested capital. Are you likely to change or control your asset allocation during the investment period? In unit-linked products, you can see the value of your investment on a daily basis through the net asset value (NAV), published by insurers on their website. If you don't want to actively manage your asset allocation and are comfortable with the insurer's guaranteed returns over the policy term, then go for traditional plans.


Do you understand the implications of early exit or discontinuing premiums? You may be unable to pay your premiums for the planned premium paying term. All life insurance products are suitable for long-term financial goals and, hence, there are costs associate hence, there are costs associated with premature surrender, and often, with discontinuing premium payments. In unit-linked products, there is a five-year lock in, during which, you will not be able to access your funds and stopping premium payments Traditional products normally provide some flexibility on withdrawals through loans against the policy, which are available from the insurer

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...
Read more

About CRISIL IPO Grading

CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comm...
Read more

Mutual Fund Review: ING Dividend Yield

  ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.   Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...
Read more

Financial Planner - Do Integrity & Dependability Check

How does one can find value proposition when it comes to financial planning, which is a new area? There is nothing to benchmark it with. So, how does one figure what is the right fee to pay? Look at what you want. You probably want to hire a financial planner to get a blueprint for your life ahead and want to know how to achieve your goals. For creating a tailor-made financial plan, our experience is that it takes 25-30 man-hours in all. Taking an average of Rs 500 per hour for hiring the services of a qualified financial planner like one who has a CFP(CM) certificate, the fee would come to Rs 12,500 to Rs 15,000. But the per-hour rate can be higher or lower depending on the process adopted, the experience and expertise of the planner, etc. That's how planners arrive at their fee. Now, is that value for money? For that you need to find out what benefits you would derive by engaging them. The financial plan will give you clarity, direction and pathway to achieve your goals. Th...
Read more

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now