Although life insurance is primarily considered a risk coverage instrument, not many are aware that there are also plans in the market that provide returns along with protection. Something like ‘killing two birds with one stone, right? This article will help you understand which those kinds of plans are.
An endowment plan is a life insurance policy that offers death benefits as well as surrender and maturity benefits. If any time during the policy term you meet with an untimely demise, your beneficiary will receive the complete Sum Assured. This is the risk coverage aspect. At any time during the policy term, the returns that you get will be guaranteed upfront. This means that when you apply for the policy, you are clear about the returns that you will receive from the policy even if you surrender it midway. In endowment plans like Edelweiss Tokio Life Wealth Builder, after a certain period of time, your policy will attract guaranteed loyalty additions (GLA). This GLA will be added to your maturity benefit at the time of maturity of the policy. The more time you stay invested in the policy, the more will be the guaranteed loyalty additions. This is an ideal plan for a low-risk appetite individual who wants to maximise his investment without compromising on the safety aspect.
Unit Linked Insurance Plans (ULIP’s)
The premiums that you pay for a ULIP are divided into 2 parts; one goes towards coverage of risk and the other, towards investment in market-linked instruments. These instruments are monitored and managed by fund managers to give you the best returns possible for your money. The returns that you get from ULIPs are not guaranteed. It depends on the return generated from the market-linked instruments where your money has been invested. If, at any time, during the policy term, you meet with an untimely demise, your family will receive the entire amount of Sum Assured. Most ULIPs like Edelweiss Tokio Life Wealth Accumulation (Accelerated Cover) declare bonuses from time to time depending on the market conditions. The best part about ULIPs is that you can switch between funds depending upon your market outlook and risk appetite. Thus, a person with any kind of risk appetite can benefit from investing in a ULIP.
ULIPs and endowment plans give you the best combination of protection and returns and possess the potential to give you the best value for your money.
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