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, beginning this Monday, Mint will feature a weekly Q&A on insurance.
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 isRajesh Relan, managing director, MetLife India Insurance Co. Pvt. Ltd.
Do pension plans also offer a life cover?
The primary objective of a pension plan is to provide consumers the opportunity to accumulate wealth for funding their retirement years with the help of regular and systematic investment.
In the past few years, unit-linked pension plans have emerged as a popular option owing to their inherent flexibility and the ability to provide potentially higher long-term returns. The flexibility includes the option of choosing a life cover. This is normally a multiple of annual premium and is paid in case of the death of the policyholder during the accumulation period.
How often are portfolios disclosed for unit-linked policies?
Normally, all insurance companies with unit-linked products disclose their portfolio on a quarterly basis in line with the disclosure norms suggested by the (insurance) regulator. However, customers also have access to the fund NAVs on a daily basis, through newspapers and websites of insurers. They also have access to the fund’s history on the websites of the companies.
What is the difference between various fund options?
Fund options differ in their objectives, risk-return profiles and hence their asset allocation. Various fund options exist to match the varying investment objectives and risk appetite of investors. For instance, funds with the objective of providing potentially higher returns, albeit at a higher risk, have higher equity content in their portfolio, while funds with the objective of providing steady returns with lower risk have high debt content in their portfolio. Various hybrid funds with varying asset allocations to equity and debt are also available as options.
How should one choose an option?
The choice should be based on three critical factors: investment objective (looking for higher returns, or if safety is a bigger priority for the investor); investment horizon (how long to remain invested); and risk-appetite (level of risk-return trade-off comfortable to the investor).
Additionally, knowledge of a fund’s history and track record can help investors make an informed decision.