Investment Through Life Insurance
We are all aware of how important various types of insurance policies are for our financial stability however, most of us are not aware that you can also invest through insurance. Investing through insurance gives you the double benefit of returns + insurance cover on your investment.
This unique combination provides an individual with guaranteed returns as well as a life insurance cover. Such policies basically serve the purpose of two different policies in just one policy.
General Information:
1) Unit Linked Insurance Plan (ULIP):
ULIP or Unit Linked Insurance Plan is a type of plan that offers you the dual benefit of investment to fulfill your long-term goals and a life cover to financially protect and secure your family in case of your absence due to an unfortunate event.
ULIP is a hybrid product that offers investment and insurance at the same time. In a ULIP plan, the premium paid is divided into two parts. A part of the premium goes towards your life cover cost while the other part is to be invested in a fund of your choice. It is very important that you choose the fund carefully as it would determine the returns you will get at the time of maturity.
ULIP offers you an opportunity to choose to invest in equity, debt, or both. You must choose the fund based on your risk appetite and future needs. It is important to note here that since you are choosing the fund for your investment, the returns of the same shall be dependent on the performance of the fund selected by you. The unique combination of investment plus insurance makes ULIP an ideal investment option for you and your family’s long-term goals
2) Guaranteed Returns Insurance Plans:
In today’s day and age, it is quite difficult for an individual to ensure financial stability and therefore various insurance companies have launched a Guaranteed Returns Insurance Plan. These plans are specially crafted to cater to the needs of risk-averse investors. These plans offer you the benefit of life insurance along with maturity benefits and regular guaranteed payouts.
The guaranteed payout ensures financial stability by providing a fixed source of income. The amount of these guaranteed payouts are usually predecided and agreed to by the insurer and the insured at the time of issuing the policy. Moreover, in case of the death of the insured, a lumpsum amount is paid to the nominee of the insured individual as a death benefit.
3) Fixed Maturity Plans:
As the name suggests, this is a type of insurance policy wherein you get a predecided fixed amount as returns for the investment made by you over the years on the maturity date of the plan. These fixed maturity plans are guaranteed. At the time of maturity if the insured person individual is alive then he will be given a lump sum amount. However, in case of the death of the insured person at the time of maturity, the nominee of the insured person would receive the same lumpsum as a death benefit.
These Fixed Maturity Plans are one of the most preferred type of investment in insurance plans as they offer fixed and guaranteed returns.
4) Participating Plans:
A participating plan is a unique type of investment via an insurance plan where in you get both guaranteed and nonguaranteed returns over your investment. While investing in a participating plan you will be provided with a guaranteed amount that you shall receive at the time of maturity. The real twist comes in the non-guaranteed returns. In these non-guaranteed returns, you get a share of the profits made by the insurance company, hence these are called participating plans.
It is important to note here that your non-guaranteed returns are purely dependent on the insurance company’s profits and hence are fluctuating based on the company’s performance during the term of your policy. Such a policy leaves you with a chance to earn better than expected returns as almost all insurance companies tend to make profits every year.
Another benefit of this plan is that during the policy term you will be also paid a fixed annual amount and at the time of maturity you will be given the guaranteed and non-guaranteed amounts as a lump sum. In case of your death, your nominee shall receive both the amounts at maturity as death benefit and the policy will be terminated.
5) Employer – Employee Insurance Policy:
Employer – Employee is a type of policy in which employer purchase a life insurance policy and insurance for its employees. It means that the ownership of the policy is with the employer and the premiums paid by the employer while the employee is beneficiary of the policy.
This insurance policy is mostly followed by employers because it works as a tool to retain old employees, attract new employees and ensure the social security of their employee.
• How does Employer – Employee Insurance scheme works?
Employee Employer insurance works on providing uniform health coverage and life coverage to each member of the organization. An Employer purchase a group life or group health plan for its workers at zero cost to the employees’ wages. It is a benefit of working in a company. As an employee, you need not pay a single penny to avail yourself and your family of health insurance under a group scheme.
• Who is eligible under this plan?
Apart from being legally employed, In the case of an organization:
- Sole proprietor
- Corporates, Corporation, and Conglomerates
- Partnership firm
- Public and private companies
- NRIS working at MNCs, registered in India
- MSMEs
• Benefits for the employer
- It can enhance employee loyalty, as the employees feel more valued and secure.
- The attrition rate of the employees goes down with this scheme
- The premium paid for this schemes by the employer can qualify for a tax exemption under section 37(1) of the income tax act, as they considered business expense.
- The benefits obtained through section 37(1) can potentially result in financial gains for the organizations.
• Benefits for the employee
- The insurance scheme functions as a reward program, thereby boosting employee morale.
- The insurance plan can be selected to provide employees with protection against accidents, illness, disability, and premature death.
- In the event of death, death claim is disbursed to the employees nominated beneficiary.
- It covered employee can access cashless services at any hospital within the insurers network.
