It’s a myth that life insurance policy’s sole purpose is to pay up in an event of the death or when the policy matures. However very few amongst us, know the fact that life insurance policies are flexibile too. i.e. they serve dual purpose – providing life cover and give returns. So investors get combined benefits of protection, saving and investment in order to meet their varying financial requirement and at the same time offering ample opportunity for wealth creation.
Such policies that offer savings and investment options are known as endowment plans and ULIPs. And the most popular variant of the endowment plan is the money back policy. In this policy, investor gets pre-defined set of money at pre-fixed interval.
Let’s get into detail of such policies.
The dictionary meaning of endowment is gift in the form of money. These life insurance plans are designed to pay a lump sum after specified number of years – which could be due to the policy holder’s death or when the policy matures. Typical endowment plans are for long term ranging from 10, 15, and 20 years or may be more than that.
The basic objective of long duration policies offering lump sum amount of money, is to meet the financial goals like child’s marriage or education. But some people also buy them to create own’s retirement corpus. In addition to this, some endowment plans also provide yearly bonus. So at the end of policy term, both the sum assured and bonus are paid out. Endowment plans are best recommended to risk averse investors wanting to generate moderate amount of wealth which is 100% tax free. Read zero risk, high return investment options in India.
Money Back Policies:
This is again a type of endowment plan. And the sole purpose of this policy is to create wealth for the policy holder and distribute it during the tenure of the policy. In addition to this, life is covered during the term of the policy and the maturity benefits are paid at regular intervals i.e. survival benefits are paid out in 5 year interval. So someone buying a policy for 20 years, will get survival benefits in 5th, 10th, & 15th year which is X% percent of the sum assured. And at the end of 20th year, Y% percent of sum assured, which is greater than X% with accrued bonus will be paid.
Unit Linked Insurance Policies:
These policies also have two main purposes: secure life and create wealth. In ULIPs, certain part of premium paid is dedicatedly used for providing life cover to the policy holder and the remaining premium amount is invested in equity, debt or both. This assigning of common pool of money is called as fund. The only risk associated with ULIP is the investment done in equity and debt which are linked to market. So fund performance essentially is the deciding factor for building wealth. But at the same time, investors are given a choice to switch between different funds and maximize wealth creation.
Here are some of the best wealth creating policies out in the market:
|Endowment Policy||Money Back Policy||ULIP|
|Endowment Assurance by LIC||LIC Money Back Policy||SBI Life Wealth Assure|
|Savings Suraksha by ICICI Prudential||SBI Life Smart Money Back Gold||MAX Life Fast Track Growth Fund|
|Life Samriddhi by Bharti AXA||Bajaj Allianz Cash Assure||HDFC Life Click2Invest|
|MetLife Endowment Savings Plan by PNB MetLife||HDFC Life Super Income Plan||ICICI Pru Wealth Builder|
|Premier Endowment Plan by Kotak Life Insurance||Reliance Life Super Income Plan||ICICI Pru Guaranteed Wealth Protector|
|Reliance Life Endowment Plan by Reliance||Aegon Life Regular Money Back Insurance||PNB MetLife Smart Platinum|