Simply put, investment linked insurance policies are life insurance plans that combines both personal protection and investment. The monthly premiums are not only meant for life insurance cover; a given percentage set as investment fund. You will get a chance to choose an investment fund that suits your needs and preferences during the application process.
Here are some of the major benefits of having this policy.
• Ability to change the amount paid as premium payments depending on your financial situation.
• Ability to choose a fund model that is in line with your risk aptitude.
• The savings are enough to offer you a comfortable life after retirement.
• Ability to choose your own personal level of investment and protection.
It is important to consider a number of factors when choosing these policies. Below are some of the factors that you should consider.
Choose policies whose premiums are affordable and within your reach. There are regular premiums and single premium plans hence finding the right one will not be a hassle.
Type of funds:
Go for policies whose investment funds resonate with your plans. Look at the specific terms and conditions that govern each fund to make an informed decision.
Level of protection:
Your selected policy should be able to meet the level of protection that you desire. Also, the insurance company must be legally accredited and have a clean record in the market to cushion you from any loses.
There are two types of investment linked insurance policies.
This entails a single premium plan feature, that is, you get to pay a single lump sum amount of money at once. Meaning there are no regular or monthly premium payments. Most of them offer a total permanent disability cover of approximately 125% of the total lump-sum investment amount. The benefit payments are calculated from the value of the investment units at the time of claim. The payments may also be determined by the total funds assured in your account. One major benefit of choosing this plan is that it enables one to invest in other income generating assets almost immediately after paying the premium.
Regular premium plans:
This is an ideal choice for investors who do not plan to invest a large amount of money at the initial stages of the plan. In case of total permanent disability or death, the basic insurance coverage offered by the company is usually a multiple of the annual premiums. One of the major benefits of choosing this plan is that it gives one the ability to request for premium inclement as the financial status improves. The premiums can be paid annually, semi-annually, quarterly or monthly. The benefit payments at the time of claim are calculated by adding the sum assured and the value of the investment units.
What is the main risk attached to investment linked insurance policies?
Economic fluctuations: The value of the investment is dependent on the prevailing economic environment. Hence, there is no 100% guarantee that the value of the investment units will be high or within a particular range ten or twenty years down the road. An expert financial or investment expert can help you make an informed decision during the application process.
Choose an insurance company that has been offering this form of policies to clients from at least ten years or so. More often than not, such companies have already paid benefits to some of their clients hence you can contact some of them to get a clear picture of what to expect in future.
Investment linked insurance policies enable retirees to enjoy a decent life after retirement.