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LIFE INSURANCE

Should you Invest in a Long-Term Life Insurance Product that Gives Guaranteed Returns?

Janhavi Shinde Janhavi Shinde 16 January 2019
5.0 (2 votes)

Investment planning is an art. To master this art, we take you through the dos and don’ts for investing in long term insurance products in this article.

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Investment planning is as crucial as earning. Today, investing in life insurance policies, health insurance, and term insurance has become a basic necessity. If you are a breadwinner of the family, it is highly crucial for you to invest in plans that give health benefits, a better future, and long-term financial security. The future is uncertain, but making a systematic investment to secure future for yourself and your family is essential.

Financial security is one of the major concerns for both middle and lower-class people. When we talk about investment, we generally think of equities and the stock market.

However, the risk is as high as the rewards in the stock market. As a salaried person, you may have a conservative approach towards investment with a low-risk appetite with two main reasons for investing in a stable, low return investment options.

1. To fulfil short-term goals: These are usually in the margin of 2 to 5 years where the approach towards investment is capital protection.

2. To fulfil long-term goals: These are usually in the margin of 10 to 20 years where the focus is to enhance the value and to earn the inflation-beating returns.

The long-term insurance plans with guaranteed benefits, are designed in such a way that they give you a guaranteed monthly income for a pre-defined number of years.

The rate of returns on the investment made is however, one major drawback with long-term guaranteed insurance plan even though it comes with a tag of ‘guaranteed income’.. The policy calculates the monthly benefit depending upon the premium payment term (PPT), the premium that you choose to pay and your age.

The annual income varies from 8.35 percent to 13 percent of the total premium paid during the policy tenure. The income is calculated from the sum of premium paid divided by 12.

Additionally, if you choose to pay a higher amount of premium, the monthly income is boosted by a certain percentage. You can also take a lump sum amount instead of opting for a monthly payment. Even if you die during the policy term, the monthly benefits are paid to the beneficiary with an option to take a lump sum payment. Remember, if you decide to go for such long-term insurance plan guaranteed returns, you are settling for lower yields.

Buying a long-term insurance policy can be a complex task and involves many decisions about the policy features and the price that you can afford. There are a few factors to consider before choosing a long-term term insurance plan that gives you a guaranteed result.

Your age

Whether you go for short-term or long-term life insurance policies, Remember the thumb rule, the younger when you buy, the less expensive the policy will be. It is advisable to buy a life insurance policy if you have long-term investment goals.

Define the goal

It is utmost important to decide why you need an insurance policy? Whether your primary objective is to cover life or to secure life after retirement. Define how long you want the policy to pay for coverage. Five years, seven years, ten or twenty years? The longer the period, the more expensive the policy.

Some experts advise buying lifetime benefits if you can afford them. One factor here to consider is the health benefit and financial well-being of your family once you are gone.

Inflation protection

If you are a younger buyer and looking for a long-term insurance policy, one thing you need to consider and calculate carefully is the inflation rate. Choose wisely from various life insurance policies to match the rate of return with the inflation rate. If you are a conservative buyer, looking for a long-term investment option in life insurance, you may go ahead and buy the best life insurance policy available in the market. Provided, you are ready to sacrifice on the rate of returns. As ROI is not as attractive as equity and mutual funds in the case of life insurance policies.

What is Guaranteed Life Insurance and Who should opt for?

The primary purpose of life insurance policies, is to provide protection to your financial dependents. However, there are saving-oriented life insurance policies which help you to save for long-term in addition to providing life protection.

There are different types of life insurance policies in India; however, guaranteed life insurance is the one with no health qualifications. Guaranteed life insurance is like all life insurance policies, pays claim to the beneficiary upon the death of the policyholder. The significant difference in the case of guaranteed life insurance is that the company cannot deny the coverage as long as you, as an applicant can afford the premiums. The insurance policy lasts for as long as you pay for it. There is a pre-defined term limit or the policy expiration date.

Guaranteed life insurance is one of the products offered by trusted insurance companies. Guaranteed life insurance policies are available to people with no medical underwriting. The premiums that are charged under these policies are higher for lower pay out than conventional plans.. .

Is Guaranteed Life Insurance worth it?

Guaranteed life insurance comes with a few risks. The risk is that the premium paid may exceed the value of the death benefits. Other than that, you may pass away during the insurance period, and the company won’t pay out. Finally, there is the risk that you eventually end up paying more than what you would pay for regular term life insurance.

Recommended Read:Life Insurance a Smart Investment for your Family

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Janhavi Shinde
Written by Janhavi Shinde
Right from being a Flight Attendant to a Banker and now to a Content Writer, she has tasted success in all the fields. The kinda girl who loves pets and knows how to manage difficult people and events.