Can life insurance be considered an investment?


Can life insurance be seen as an investment? Although the primary purpose of life insurance is to protect the financial future of named individuals or a policyholder’s family in the event of death, certain types of policies may also offer additional investment opportunities. . So, let’s dig deeper into this question.

What is an investment?
An investment means committing an asset or money to increase in value over a period of time. An investment will require an expenditure of an asset in the form of money, time and individual effort/financial discipline. The purpose of any investment is to get a return/profit on the amount/asset invested.

Is life insurance an investment?
The question remains – can you take life insurance as an investment? Most life insurance is purchased to manage risk, while death benefit works as a cover that guarantees liquidity in the event of the sudden or unexpected death/death of the policyholder.
It makes it possible to repay any debt (real estate or personal loan) while ensuring an income for the beneficiaries. However, life insurance can be considered an investment because of the associated tax advantages for policyholders. It’s at a basic level. You can also opt for insurance policies that offer life coverage and the ability to save or invest, such as an endowment plan or ULIP.
From all of these angles, life insurance is a crucial investment. You can always use a life insurance calculator to calculate your total premiums and the returns you get in the form of the maturity benefit or even the expected benefits in the case of a ULIP.

Can you get returns from a life insurance policy?
Yes, you can get returns from your life insurance policy. First, there are different types of endowment plans. These plans provide lump sum maturity benefits to policyholders if they survive the term of the policy. Therefore, they pay this accumulated corpus after the end of the quarter.
In the event of premature death of the policyholder during the period of insurance, the death benefit is paid to his authorized representatives. Endowment plans are ideal for more risk-averse investors who want to accumulate a lump sum towards their future goals while simultaneously benefiting from insurance coverage.
Second, there are ULIPs. These are unit-linked insurance plans that offer both the benefits of life insurance coverage and investments in market-linked funds. You will have to pay regular premiums to the insurance company to obtain life cover, and these will also be invested in selected funds for long-term wealth creation.

You can deploy investments in multiple funds, including debt or equity funds, or even a combination of these types. You can choose the funds in which you wish to invest when purchasing your ULIP. You will thus obtain a determined number of fund units. You can thus earn returns on the investment, depending on the market performance of these funds.

What are the different types of life insurance plans available in India?
There are different types of life insurance plans. Some of them include the following:

1. Term Insurance Plans – These are basic schemes offering a guaranteed sum insured on the death of the insured during the term of the contract. They have no investment component. Term insurance plans help secure the financial future and family goals in the absence of the insured. Although there are no maturity benefits, one can opt for a refund of premiums at the end of the contract term.

2. Staffing Plans – They work like term plans, although they also offer a maturity benefit if the policyholder survives to maturity. Therefore, these plans have a savings component. An insured death benefit is paid to the policyholder’s nominees in the event of death during the term of the policy. Otherwise, a lump sum at maturity is paid at the end of the policy term. This amount at maturity may vary depending on whether the plan is with or without participation.

3. ULIP – These plans offer life insurance coverage as well as investments in stocks, debt, or a combination of these funds for wealth building. They are best suited for investors with variable risk tolerance, as they invest in different market-linked funds, with returns directly dependent on their performance in the market over an extended period of time.

4. Whole Life Insurance Policies – Most life insurance policies guarantee coverage for a fixed term. However, these policies cover their policyholders throughout their lifetime. After the end of the premium payment period, the policyholder may obtain a regular or lump sum payment of benefits at maturity if specified in the policy. In addition, a loan can also be taken out against this policy (after 3 years of purchase) in case of emergency.

5. Annuity plans with life coverage – Also called retirement plans, these are primarily intended to provide regular income after retirement. This is done by releasing the accumulated font corpus under applicable terms and conditions.

Who can you get the most out of these plans?
Although the basic purpose of a life insurance policy is to secure your applicants’ financial future in your absence, you should look for plans that also help you achieve your future goals. Term insurance plans are suitable for securing your family’s future and financial goals in the event of your unfortunate death. ULIPs are ideal for investors comfortable with market risk as they invest in market-linked funds to achieve returns over a regular period. They also provide life insurance coverage on the side.

Endowment plans are suitable for those who are mildly risk averse, as they provide insurance coverage while coming with an assured maturity payment at the end of the policy term (if the policyholder survives the same). Whole life insurance policies and annuity plans are suitable for specific investors, i.e. those who suffer from chronic illnesses and need long-term coverage at relatively reasonable rates and those who want a stable monthly income after retirement.


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