We all know that life insurance provides protection to our family from unfortunate events and helps us in securing our financial losses from going through uncertainties. However, if you are buying an insurance policy, it often means you want a good insurance cover to protect your family and nothing else. For example, when you are buying a pure term insurance policy which does not have an investment factor in it.
However, when you are keen to invest in an insurance policy, you are keen on some 'returns' from the policy in addition to the life insurance cover. Say for example, you want to invest in endowment plan, ULIP or term insurance with return of premium policy. In such a situation it becomes crucial to understand whether it is correct to consider life insurance as an investment product and what factors to keep in mind while doing so.
Anoop Pabby, MD & CEO, DHFL Pramerica Life Insurance said that individuals have to face uncertainties in life and a life insurance policy acts like a shield to protect the financial needs of their family during any untoward incident. However, people invest in insurance policies only towards the end of a financial year for tax saving needs like any other investment product without understanding the exact implications of it. “Hence, it should not be considered as an alternative to investments and be given a priority while planning one’s finances,” he said.
Moreover, the consumers should be able to understand their needs before buying or investing in a life insurance policy as there are diverse investment options that come along with different types of policies. “At the same time, it is advisable to buy a life insurance plan as early as possible as when one invests in a good life insurance plan at a young age, not only the premium pay-out is lesser but the benefits are huge and can also help in achieving long-term goals such as buying a home or planning your retirement,” suggested Anoop Pabby.
Naval Goel, Founder and CEO, PolicyX.com said that any form of insurance policy should be a source of relief and security to you. Insurance products also provide long-term investment along with protection. “Therefore, it is important to follow the standard thumb rules before making an investment in any insurance policy,” he said.
Goel stated these six simple thumb rules which one should keep in mind before making an investment in the insurance policy.
=| When we talk about investment in life insurance, it is always advisable that you have a sufficient life cover first where your life cover should be at least 10 times your annual income so that it covers all the dues and liabilities after you and your family is not burdened by the same.
=| Along with this one should also keep in mind the future expenses like child's education, marriage etc. while making an investment in the insurance policy.
=| It is also important to check the background of the insurance company from which you are planning to invest in the insurance policy. Everything from its portfolio to claim settlement ratio should be checked.
=| Before investing one must always compare first and then buy the appropriate plan. There are number of insurance companies and plans available in the market. Not every plan will suit your requirement and you may end up buying a plan which is not even fulfilling your needs. Look for a good comparison portal online and compare all the plans first before making any purchase decision.
=| When investing in investment product like ULIP, one must check the fund performance. Details of their fund's performance are given by all the insurance companies online. The thing to focus here is the stability and consistent track record of the fund.
=| In the end, one must know what you are buying. Every minute detail about the policy should be disclosed by the agent to you so that you know what you are investing in
. Do the research from your end also and invest wisely.