When you compare life insurance with the return you get from vehicles investment , you will naturally choose to buy a life insurance policy that would provide insurance coverage and not to serve as an option investment.
There are two forms of life insurance policy in the industry – term insurance, and unit linked plans, or ULIPs . There is another type of insurance – which is popularly known as the insurance based investment endowment plan. One of the issues that arise in the mind of the potential insurer is : should you use the life policy as an investment ? In other words ,when there is a great expense that is planned towards insurance policy, why should we not get returns out of the investment, along with the insurance coverage? That, precisely, is the idea behind endowment policy, where you could purchase life insurance and also stand to gain from the benefit perspective.
What is the Endowment policy?
One of the most popular attractions of investing in insurance is that you would be eligible for regular and accrued bonuses and also receive survivor benefits at the end of the term of the insurance policy. When you buy life insurance policy, you should also be eligible for returns on predetermined rates. Regarding the bonuses, they tend to be cumulative and payable to the policy-holder on maturity of the insurance policy, or the death of the insured seeker. Even if you survive the policy term life insurance, you will have value at maturity of survival.
The Catch:All these seems attractive, but some aspects also deserve your attention and consideration.
High annual premium: When you are entitled to a Maturity Amount on survival at the end of the term of your insurance coverage, you should naturally expect higher annual premiums to be paid.
Unpredictable Bonus: Although you can expect regular bonuses which tend to accumulate, there is no way you could know how much bonus you get from the insurance policy.
Low Returns: Despite its value in eligibility due on survival, you will find that the yields are always below par, when you compare life insurance with a pure investment option.
Better interest rates: you will have the insurance coverage and the amount of maturity with bonuses. But the premiums are not paid as and when they are declared. Instead, they have accumulated without generating interest on the accumulated amounts. With this insurance policy, you lose in interest rates.
Higher yields: This life insurance policy basically invests in the investment portion of your expense in Government bonds. You may have security, but not the high returns that you could otherwise earn..
Smarter investments: If you are looking for a smarter option, you should be separated only with the part of the insurance equation, and invest the other party of an investment option that gives you higher yields. When you compare life insurance policy with other investments, regular investment options usually give you better returns.
What can you save on?You can save on premiums. When the part of the investment equation is out, your life insurance policy would give you just that insurance coverage. You can buy life insurance as a separate entity, such as term insurance or ULIPs and could invest the other part of your expenses on instruments that give you the highest levels of performance. You can not have a value of such a policy of maturity insurance, but you might as well save on the premiums you would have otherwise paid .
So should you use life insurance as an investment:
It emerged from the discussions that the policy of life insurance should give you insurance coverage, since the benefits you get, in terms of amount at maturity of a staffing plan would be jeopardized because of higher premiums paid .
In conclusion, When you compare life insurance with the return you get from investing in vehicles, you naturally choose to buy a life insurance policy because of what is supposed to provide , which is life insurance coverage and not to serve as an option investment.