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.
Unit-linked products offer various fund options. What is the difference between various fund options? How should one choose between the options?
Fund options in unit-linked products differ in their objectives, risk-return profiles and hence, their asset allocation. Various fund options are provided to match the varying investment objectives and risk appetite of different investors. Thus, for instance, funds with the objective to provide potentially higher returns with higher degree of risk essentially have higher equity content in their portfolio, while funds with the objective to provide steady returns with relatively lower risk have high debt content in their portfolio. Various hybrid funds with varying asset allocation of equity and debt are also available as options to the investor. The choice of a fund option along with other factors should be based on three factors: First, your investment objectives. For example, whether you want higher returns or whether the safety of your investments is of a higher priority. Second, your investment horizon, which means how long you would like to remain invested. And finally, measure of?your?risk?appetite,?how?much risk you’re willing to take to achieve your required returns.
What is the procedure for nomination and cancellation of policies?
The procedure for nomination in an insurance policy is standardized. The policyholder at the time of applying for the policy needs to fill in the nomination details, which is part of the application form. In case the nominee is a minor, an appointee is also required to be decided by the policyholder. Additionally, insurance firms also give the option to change nominations later. The cancellation of the policy can only be performed by the policyholder. As a procedure, the policyholder would have to apply in writing to the insurer his intention of cancelling the policy. Each firm may have some rules on policy cancellation based on the product type, policies, etc. that govern any application for policy cancellation.
Readers are welcome to write in with their queries to email@example.com. The questions will be answered by senior executives from leading insurance firms.
This week’s expert is Rajesh Relan, managing director, MetLife.