Life Insurance: V Philip

Should life insurance products, other than term plans, be a part of one’s portfolio? Are these products meant for long-term goals? On average, how much do they return?
An ideal portfolio should be a mix of savings and protection instruments. Term plan, a protection instrument, is important to help the family sustain the prevailing standard of living, in case the breadwinner passes away.

Investment plans are instrumental in attaining long-term financial milestones at different stages of life, such as buying a house, car, taking a holiday, starting a business, child’s marriage, education etc. In addition to building a corpus, these plans provide life cover as well. These plans are available on the unit-linked as well as the traditional platforms. They also offer optional riders which can help you meet specific needs like critical illness, disability, hospitalisation.

 

The returns on investment plans would depend on the type of product. Traditional plans give minimum guaranteed returns in the form of sum assured and bonus. Unit-linked plans are more transparent, offering stock market-related returns as well as fund options.

I will soon be moving to Singapore. Before that, I want to buy a life cover. Should I buy the same in India or Singapore? Are insurance products valid across countries? What would be the difference in norms applicable across countries?
You can buy a life cover in either of the countries, provided the premium is paid from your earnings in that country and currency. Also, in case of death, the claim would be payable to the claimants in the currency of the country from where the cover has been bought.

Insurance products are valid across countries, as the place of death is not considered at the time of claim. Hence, life insurance products are valid anywhere in the world. However, remember you can use it as a collateral only in India, nowhere else. The terms and conditions of an insurance policy vary across countries.

Therefore, you should decide on the pros and cons of taking a life cover, depending on the tenure of your employment abroad.

Do unit-linked plans give growth and dividend, as mutual funds do, with funds in which they invest?

Ulips give the dual advantage of life cover and transparency. However, these do not offer dividends like mutual funds. They offer additional benefits like guaranteed additions or loyalty additions after a certain number of years, which help accelerate your fund value and enhance your returns.

What are the factors that decide the premium for an insurance policy? How important is it to know the applicable mortality charge? How much does mortality rate contribute to the premium?
An insurance plan’s premium depends on factors like age, policy term and lifestyle habits such as smoking, alcoholism, apart from the riders opted.

Ulips being a transparent product, the mortality charges are explicitly mentioned in the brochures or product descriptions. Mortality charges vary across products, as each one is designed for a different demographic profile and lifestyle category and the probability of death is different for each profile. These are expressed per Rs 1,000 of the sum assured every year.

The writer is managing director & chief executive officer at Bajaj Allianz Life Insurance. The views expressed are his own. You can send your queries to yourmoney@bsmail.in.