Ulips Vs Endowment Insurance Plans – Which is more suitable for you and why?

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September 17, 2020 11:45 AM

The environment has been uncertain and that has led to people moving to pure protection plans and assured return plans as their preferred choice.

Ulip, endowment, Life insurance policies, plans, types, benefits, life insurance, term insurance plan, protection, savingsOne has become more aware of insurance given the ambiguity prevailing in recent times.

There are different types of life insurance plans available in the market. Some of them are pure risk covers while others are a mix of savings and protection covers. For some, only the pure risk covers – called term insurance plans – may be enough while for others a combo of protection and savings cover may be required. This depends largely on the fact as to how comfortable the individual is in managing protection and saving separately.

This leads to the basic question as to who should opt for each of these plans? In an email interview with FE Online, Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance, shares his views on the suitability of life insurance plans. Excerpts:

In terms of the mix, are individuals preferring traditional insurance plans or opting for Ulips?

Customers invest as per their need and risk appetite. Their needs are innate and life stage-based. However, the environment does influence the risk appetite to some extent. The pandemic has made people more aware of Insurance as a category and that is a positive shift. The environment has been uncertain and that has led to people moving to pure protection plans and assured return plans as their preferred choice. Term cover and Traditional Plans that enable assured savings are both great tools for insuring life events and certainties.

Who is more suited to buy traditional insurance plan and similarly who should prefer buying Ulips for protection and investment needs?

Life Insurance is not an option, it is a necessity. It is one of the most important decisions one makes to secure the future of their loved ones in case of an unfortunate event. Life Insurance is also one of the only investments that is suited for long term goal achievement. Ideally, one should start with identifying their need and accordingly save towards the same systematically.

Traditional plans provide fixed benefits and assurance for those who would want defined outcomes in a given timeframe enabling them to meet their goals. These plans do not need to be monitored or evaluated basis market trends as the insurer manages the investment risk on behalf of the customer and passes on the assured amount. Hence, these plans are ideal for passive investors.

On the other hand, Unit Linked Plans participate in the market and the returns are accordingly linked to market performance. All Life Insurers have in house investment experts who manage their Unit Linked funds actively basis the fund philosophy; and these can potentially give superior risk-adjusted returns over the long term. A customer may also choose to switch funds, redirect premiums, book partial profits through withdrawals etc. Customers who choose to be relatively more active and have an evolved understanding of the markets should opt for ULIPS

Any specific trend that you are witnessing especially during the ongoing pandemic?

Customers have certainly become more aware of insurance given the ambiguity prevailing in recent times. This fear psychosis has led to a larger demand for protection plans and also guaranteed return plans.

The other trend is that of acceleration in digital adoption across the value chain. Customers are more open to exploring options digitally or remotely – at various stages of the purchase journey.

Additionally, customers are proactively exploring digital mediums, using self-service options and completing purchase journeys remotely, whether independent or assisted.

These changes have led to need-based products and process innovation such as covers paid on diagnosis of Covid-19 or enabling Phy-gital sales.

We, at IndiaFirst Life immediately launched Ghar Baithe Insurance in April for continued Sales and Service and this was widely accepted. We also launched a multilingual website in April to cater to all our customers spread across 98% of the pin- codes in India.

Outreach through intelligent IVR, chatbots (IRIS), WhatsApp and mobile app have ensured availability across platforms to enhance customer experience. AI is set to impact majority of processes right from prospecting to processing and servicing. Agility, flexibility and adaptability are key mantras to evolve and stay relevant in these challenging times.

Anything else that you wish to highlight for new and existing buyers of life insurance?

One question that I get asked often is when should an insurance policy be bought and I respond without batting an eyelid that the right time to buy life insurance is NOW. The cost of postponement can be crippling. The earlier one buys life insurance, the better it is for one’s peace of mind.

Furthermore, insurance plans are tailored to meet long-term, systematic investment needs of the customer while helping them provision for the certainties in life. The importance of having a life cover with a wrap-around savings element cannot be undermined. Life insurance as an asset class provides the right solution for the inevitable situations.

My submission to the readers is, get your financial planning right by availing the right amount of life cover to grow your wealth, build your dreams and nurture the aspirations of your loved ones for a secured future.

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