Page 23 - LIFE INSURANCE TODAY Novemver 2017

Suppose at 55 you buy a whole life If you stop paying premium in the first pure debts funds, but at the same
cover for Rs. 50 lakh sum assured and three years, you may not get anything time, you do not want risk with higher
the premium payment term is 10 back. equity exposure, you can even con-
years, you will have to shell out Rs. sider equity savings funds — a fairly
3.5-4 lakh every year. For 5-6 per cent Surrendering at the end of the third recently introduced category in MFs.
return, the financial commitment in year will fetch you 30 per cent of to- They invest in equities, debt and arbi-
these polices is too high. tal premium paid. trage opportunities (basically equity
derivatives).
Returns are poor in whole life plans If you do so between the fourth and
because they are basically endow- the seventh year, you will get 50 per The funds’ exposure in arbitrage op-
ment products where the funds are cent of total premium paid. The per- portunities is about 30-35 per cent,
invested in government securities and centage of surrender value increases which is to reduce the volatility in re-
bonds. While this ensures that the risk with time and becomes 70 per cent turns from equity.
is lower, the returns are also lower. after 21 years.
If you are ultra conservative, you can
What also pulls down the returns in What you can do even look at post office schemes —
endowment products is that they are There are several financial instru- may be PPF.
traditional policies and the agent com- ments today that can generate good
mission and other costs are high. returns on commitment of a long- But if you can stomach some risk, you
term investment. can consider corporate FDs. Tax-free
On a gross return of 8 per cent, the bonds can be a good option, but at
IRR of whole life endowment policies Based on your risk appetite, you can present there are no issues open.
works out to 4.5-5.5 per cent because choose between mutual funds — eq-
of their high cost structure. The other uity, balanced and debt. So, if you intend leaving a legacy, in-
flaw in traditional policies, including vest that amount elsewhere and write
whole life plans, is the very low sur- If you are looking for a product that a will, making your loved ones legal
render value. can give higher returns than FDs or heirs. (Source : Business Line)

Frequently Asked Questions on Conventional Life Insurance _ Continued from page 14
least 2 to 3 months in advance of the Q. What is meant by settlement while the policy is in force?
date of maturity of the policy intimat- options? A. The basic documents that are
ing the claim amount payable. A. Settlement option means the facil- generally required are death certifi-
The policy bond and the discharge ity made available to the policy holder cate, claim form and policy bond,
Other documents such as medical
voucher duly signed and witnessed to receive the maturity proceeds in a attendant's certificate, hospital cer-
are to be returned to the insurance defined manner (the terms and condi- tificate, employer's certificate, police
company immediately so that the in- tions are specified in advance at the inquest report, post mortem report
surance company will be able to make inception of the contract). etc could be called for, as applicable.
payment. If the policy is assigned in The claim requirements are usually
favour of any other person the claim Q. What documents are gener- disclosed in the policy bond.
amount will be paid only to the as- ally required to be submitted in
signee who will give the discharge. case of death of life assured Courtesy IRDA

Life Insurance Today November 2017 23

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