Ravi was having lunch with one of his friends Rahul. They were discussing how quickly their kids grow up. Rahul and his wife had just returned from attending their eldest son’s school annual day function. Ravi was worried about his son’s future and asked Rahul, “What have you planned for your child, your retirement and other life goals. I am really very worried about such financial goals.”
Rahul replied, “We have a bucket list. We have life goals. We have relationship goals. And to fulfill all those, we have financial goals. But, how do you meet such financial goals? Until you win a jackpot, you will always try to find some financial vehicles to meet your financial goals be it a short or long term. There are various options available to build a corpus as per your needs. Out of all those, one such way is life insurance.”
“But is life insurance a good investment option?”, Ravi asked
Rahul replied, “Let me tell you a story. A few years ago, my acquaintance who was a business owner had suffered a severe stroke and unfortunately within a few hours, he passed away.”
Rahul then continued to explain, “Nobody wants to die young. Leaving behind the business for which one has spent life in building-up. No one wants to die and leave debts for the family to repay. And above all nobody wishes that their family suffers and struggles all alone to make ends meet. It is for this very reason; an investment in life insurance is a must.
Whether you are unmarried with dependents counting on you for their financial needs or a married person who is a primary breadwinner of the family or a middle-aged person nearing retirement Life insurance has a lot in store for you.
Insurance is one of the popular financial instruments that almost every individual possesses. Insurance policies were initially developed as a security product offering financial security to one’s family in case of the unfortunate demise of the policyholder. But today, insurance also serves as an investment instrument. The key is to make sure you know your financial needs before opting for insurance as an investment instrument. Let us take a look at the various aspects of life insurance and its role as an investment instrument.
Overview of Life Insurance Policies
Life insurance policies can be broadly classified into pure insurance instruments, like term plans, and diversified products which offer investment options along with insurance benefits. Let us take a look at both the categories of life insurance policies as well as various products under each category.
Pure Insurance Products
Pure insurance products have been designed to offer a protective cover to the dependents and the family of the insurance seeker in case of his demise. Term insurance plans are a popular pure insurance product that focuses on security alone and not on any investment-related financial earnings.
Investment-cum-insurance products like endowment plans and ULIPs are popular with many youngsters today as they offer the benefits of insurance along with a growth of money to the policyholder.
Endowment Policy: An endowment plan is an insurance plus investment plan that offers a guaranteed sum assured as a maturity benefit. In case the policyholder survives the tenure period, the payments are made out to the individual and if he or she meets with an unfortunate demise then a death benefit is paid to the nominee.
ULIPs: In ULIPS or Unit Linked Insurance Plans, a part of the invested amount is kept to provide coverage, while another part is invested in market-linked equity and debt instruments.
Things to note while you choose a plan:
The primary objective of insurance is to offer protection to the family and dependents in case of any mishap or unfortunate demise of the policyholder. A life insurance policy for investment should be considered only after getting the basic life cover.
If you are ready to take some risk, ULIPs are a good option but ensure you choose a plan that provides you an option to invest in a good mix of equity and debt instruments. If you are investing for your child’s education, or for some other intermediary goals, Edelweiss Tokio Life Wealth Plus provides a rising star benefit, under which a sum assured is paid to the nominee immediately and all the future premiums are immediately credited to the funds chosen by the policyholder. This ensures that your child meets his career goals as planned by you.
After knowing all the necessary aspects, Ravi is all set to buy an insurance policy. He thanked Rahul for giving him valuable insights on life insurance and suggesting him to secure his child’s future.