Should You Invest in a Long-term Term Insurance Plan That Gives Guaranteed Returns?
Published On Jun 26, 2021, Updated On Jun 29, 2021
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A life insurance policy is purchased to ensure the financial security of your loved ones in case of an unfortunate event. The nominee or the beneficiary nominated by you gets the death benefits after your demise. However, this is not the only purpose of a life insurance policy. Multiple policies provide additional benefits to the life assured. For instance, an endowment plan offers a dual advantage of life cover and investment options, whereas a money-back life insurance policy provides the twofold benefit of coverage and savings.
The guaranteed life insurance policy or long-term life insurance policy with guaranteed benefits is a type of life insurance policy that helps save for long-term goals while offering life coverage. Read on to know more about the guaranteed life insurance policy.
What is a Guaranteed Life Insurance Policy?
The long-term insurance plans with guaranteed benefits offer constant monthly income to the life assured for a specified duration. These monthly benefits are influenced by certain factors like the age of the life assured, the payable premium, and the premium payment mode. The company has to provide the coverage if the life assured pays the regular premium amount within the policy duration decided at the policy inception. The option of a lump sum is also available instead of monthly payments. Moreover, if the life assured dies within the policy duration, the nominee can take the lump-sum amount as well. Another feature of the guaranteed life insurance policy is that no prior medical examination or qualifications are necessary.
Factors to Consider Before Purchasing a Guaranteed Life Insurance Policy
Here are some factors that should be considered while purchasing a long term insurance policy with guaranteed benefits.
It is advisable to purchase a life insurance policy as soon as you start earning a stable income to get higher life coverage at low premium rates. You can buy the policy if you wish to fulfil your long term investment goals.
It is advisable to determine the motive behind the purchase of a life insurance policy. You should evaluate your personal and professional needs and future financial goals and aspirations. The policy tenure, the sum assured, maturity or death benefits etc., should be estimated beforehand.
The inflation rate should be kept in mind while calculating the return of investments (ROI) rate before purchasing a long-term life insurance policy. However, it should be considered that ROI on the life insurance policy would not be as high as that on mutual funds and equity.
Should You Invest in a Long-term Term Insurance Product That Gives Guaranteed Returns?
Although trusted insurers sell the guaranteed life insurance policies without any medical qualification or underwriting, some financial advisors suggest discretion due to the few risks involved. Moreover, there are chances that you might end up paying more premium than the death benefits. The premium is higher than any traditional life insurance policy. However, according to other financial advisors, you can consider the policy as a pension arrangement with regular monthly tax-free benefits.
All the above-mentioned points should be carefully understood before burying a long-term life insurance policy with guaranteed benefits. You can even consult a financial advisor or an insurance agent who can help contemplate the pros and cons of the policy and make a sound financial decision for yourself and your family.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.