Can I use Life Insurance to build corpus?
November 20, 2019
Apart from securing the financial future of your family, insurance policies are now also a smart way to build wealth. Check out this post to know the different types of life plans that you can consider to get the dual benefits of protection and wealth creation.
Once people get settled in their professional lives, two things that often come across their minds are purchasing life insurance and investing. While life insurance can help secure the financial future of the family, investing from an early age can enable wealth creation. But thanks to the insurance providers in India, both objectives can now be achieved through a single product.
There are now many different types of life plans that combine insurance with wealth creation. While other investment options such as equity, and mutual funds play an important role in long-term wealth creation, these insurance plans offer the dual benefits of protection and building corpus.
Here are some of the popular Life Insurance Policy types that you can consider for wealth creation:
ULIP or Unit Linked Insurance Plan combines life insurance with investment. Just like pure life insurance, you are required to pay regular premiums for a ULIP. The premium amount will be divided into insurance and the investment plan selected by you at the time of purchasing the policy.
Many of the insurance providers offer equity, debt and hybrid fund options with ULIPs. The returns from these plans are market-linked. You are allowed to withdraw the investment part of the plan after a certain lock-in period, or the same can be given to your beneficiary in case of your death.
2. Endowment plans
If you are a risk-averse investor and market-linked returns are not for you, endowment plans can be an excellent option as life insurance to build wealth. These are long-term saving plans that come with life cover. On maturity, the policyholder can withdraw the savings either as a lump sum amount or in monthly instalments.
In case of the demise of the policyholder, the beneficiary of the policy will receive the assured sum. In case you survive the policy tenure, the lump sum amount from the policy can then be used for several financial objectives like higher education of the children, their marriage, etc.
3. Guaranteed returns plan
You can also find 'with bonus' (participatory) and 'without-bonus' (non-participatory) guaranteed returns insurance plans. In the bonus option, the insurance provider can regularly add a certain bonus to the assured sum of the policy. However, such bonuses are not guaranteed and depend on the profits generated by the insurance provider.
If you go with the without-bonus option, the policy will mostly have a guaranteed return/addition in place of the bonus. The guaranteed returns offered by such plans make them an excellent choice for anyone looking for life insurance to build a corpus.
Wealth creation with Life Insurance
If you are planning to start investing and also want to purchase life insurance, do consider the options listed in this post. While the returns are generally not as high as pure investment plans, the life insurance component of these plans makes them an excellent choice for safety and wealth creation.
The different types of life insurance plans stated above are now available in many different variants. So, make sure that you first thoroughly understand the policy and its features before making a decision.
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