If you plan long term, market swings may not impact Ulips

If you plan long term, market swings may not impact Ulips
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First Published: Mon, Jul 14 2008. 12 43 AM IST
Updated: Mon, Jul 14 2008. 12 43 AM IST
The insurance business in India isn’t just growing, but is also becoming more and 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 35-year-old man working in a manufacturing firm. I am keen to invest in a unit-linked insurance policy (Ulip) but I am really confused. The markets are in a volatile state and, considering the current political and economic conditions, would it be a correct decision to buy a product such as a Ulip?
Unit-linked insurance policies, popularly known as Ulips, provide the twin benefits of protection plus investment returns. Ulips provide high flexibility in financial planning and are important tools for creating wealth over the long term. They can be used by an individual to structure asset allocation depending on the person’s risk appetite.
India’s macroeconomic factors, such as favourable demographics, high savings rate in the economy and low equity penetration, provide significant opportunities for products like Ulips.
It is advisable to buy Ulips with a long-term objective. As such, short-term market fluctuations may not necessarily have much of an impact on the performance of Ulips.
I am a 30-year-old man. My problem is that I don’t have any sort of life insurance plans so far. I am now thinking of buying one. Which life insurance plan, including pension plans, should I go for?
I must start by saying that you should invest in life insurance as it is one of the best financial planning tools to guarantee peace of mind.
India lacks a well-defined social security system and the traditional support system is weakening.
So, a vast majority of us are left to fend for ourselves after retirement.
Life insurance and pension plans help us plan our finances and provide a strong security net in case one outlives savings.
There are broadly two kinds of plans available in the market—pure protection plans and protection plus savings plans. Pure protection plans are also called term insurance—they provide risk cover alone. In protection plus savings plans, there is a mix of life insurance and savings rolled into a single plan.
Whatever plan you go for, please understand the features and benefits of the life insurance plan you are planning to buy and ensure that it meets your lifestyle requirements.
Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Rajesh Relan, managing director, MetLife.
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First Published: Mon, Jul 14 2008. 12 43 AM IST