Page 22 - LIFE INSURANCE TODAY Novemver 2017

Don’t rely on

insurance for

wealth creation

W hole life insurance poli- These plans have a

cies are becoming popu-
premium payment
lar. They are being sold to
individuals who wish to term (10/15/20 years) that is shorter
than the policy term.
leave a legacy for their children. But
the age of 80, his nominee will be paid
unless you are an ultraconservative So, once, at the end of the premium
Rs. 50 lakh again and the policy will
investor, there are better options than term, and then at the time of death
terminate.
insurance policies for wealth creation. (or maturity of the policy), the policy-
holder gets the sum assured.
Getting the sum assured twice makes
The attraction of whole life plan is that the product look wonderful, isn’t it?
the risk cover is for the entire life, and While at the end of the premium pay- But if you work out the return (IRR),
the policyholder gets the sum assured ment, the benefit will be sum assured you will realise that the longer you live,
for sure. However, the returns are low plus bonus, if any, at the time of death the lower the return; the closer you get
and the annual financial commitment (or maturity of the policy), it will be to hitting a century, the returns will
is high. just the policy’s sum assured that will
be paid. drop to as low as 4-5 per cent.
Here we look at why endowments Disadvantages
HDFC Life’s Sampoorn Samridhi Plus,
plans, particularly whole life plans, are
SBI Life’s Shubh Nivesh, Max Life Whole life plans are expensive. If you
an unattractive option for wealth cre-
Whole Life Super and LIC’s New are young, say in your mid-30s, and
ation.
Jeevan Anand are some prominent looking to buy a whole life plan in-
whole life endowment plans. stead of a pure risk cover, you must be
What are whole life plans sure about paying the premium till the
In pure protection plans, that is, term For instance, consider an individual end of the premium term.
life policies, the risk cover is till 70-75 aged 40, who has taken a whole life
years, as this is assumed to be the plan for a sum assured of Rs. 50 lakh Premium for Rs. 50 lakh sum assured
maximum age till when an individual and has to pay premium for 20 years. policy for a 30-year male for a pre-
will contribute financially to the fam- mium payment term of 20 years can
ily. But in whole life insurance plans, If he survives the next 20 years, he will be about Rs. 1.25-1.35 lakh. If you
the risk cover is for the entire life and get the sum assured of Rs. 50 lakh and have crossed your 50s, the policy’s
the policy maturity is usually at 100 bonuses, if any (if it is a participating premium will be even more expen-
years. plan). Then, if he passes away, say at sive.

Don’t ever wrestle with a pig. You’ll both get dirty, but the pig will enjoy it.

22 November 2017 Life Insurance Today

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010