The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
I am a 25-year-old man working with a software firm. I want to invest in a savings instrument, preferably in a unit-linked insurance plan (Ulip) or a mutual fund. What should I go for?
Ulips combine protection along with market-linked investment returns. Mutual funds and Ulips are different products and address different needs. While Ulips are similar to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is, and will always be, protection.
The value that insurance provides cannot be underestimated. Life insurance provides benefits that no other investment plan can offer because it helps provide peace of mind to a family.
The decision to invest in either a mutual fund or a Ulip should depend on your investment horizon, that is, the time period for which you are looking to invest, and your protection needs.
I am a 40-year-old self-employed man. I have given a loan to my brother to start a new business. Can a creditor take a life insurance plan in the name of his debtor to secure the money given by him? If yes, can his family claim any part of it in case he dies?
Normally, a creditor can take a life insurance policy on the debtor’s life as he has an insurable interest in it to the extent of his loan. However, the creditor in such cases tends to be a financial institution. It would be difficult for you as an individual to prove such “insurable interest”.
However, if there are documents to validate the debt, you could ask your brother to take a policy in his name to the extent of the loan and assign it to you. While life insurance is relevant in special situations such as creditor-debtor, its prime purpose is to protect the family and thus act as a social security tool.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms. This week’s expert is Rajesh Relan, managing director, MetLife.