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Sunday, June 13, 2021

Build your wealth with flexible traditional life insurance savings plans: Know benefits

It is prudent to underline your current and future financial needs, understand the various options available and then make a smart choice that aligns with your requirements.


Updated: June 9, 2021 6:34:13 pm
traditional life insuranceWhen it comes to traditional life insurance plans, one must understand the different aspects of these plans before deciding to invest in one. (Representative image)

Written by Anil Kumar Singh

The pandemic-driven awareness about life insurance has further underscored its indispensable nature during such trying times. While awareness steers the people towards exploring life insurance covers, it may not necessarily provide the tools to make a knowledgeable decision about the most appropriate cover for self and family.

It is prudent to underline your current and future financial needs, understand the various options available and then make a smart choice that aligns with your requirements.

When it comes to traditional life insurance plans, one must understand the different aspects of these plans before deciding to invest in one. Traditional plans are low-risk life insurance products that usually invest in bonds and are suitable for people with a low-risk appetite. These plans provide a partial or complete guarantee to the customers on the cash flows they receive during the term.

Traditional plans are suitable for someone seeking long-term financial stability, risk coverage and guaranteed returns, and a continuous cash flow for predictable upcoming life events such as marriage, child’s education, or retirement.

One can exercise the flexibility feature to customize these plans to meet their financial needs and fulfill their roles and responsibilities at different stages of life. Following are the benefits of a flexible traditional life insurance plan:

  • Choice of benefit options: Traditional plans now offer multiple benefit options that a customer can choose from. These options range from short-term income, long-term income, to whole life income (till 100 years of age) and cater to needs across all stages of life. One can evaluate their needs at different stages and choose an option that would most benefit their situation and loved ones. The flexibility to choose the term period allows the policyholder to achieve their milestones without compromising on the standard of life.
  • Guaranteed income: The financial uncertainties caused by the pandemic have increased the need for a guaranteed/secondary income source that reduces the financial burden and acts as a financial security tool. A traditional guaranteed income or savings plan will provide a regular flow of income during your chosen benefit payout period while safeguarding your savings. Measures like these allow a person to ride out financial insecurities without a substantial blow to their lifestyle.
  • Bonus payouts: Apart from a regular income, certain traditional life insurance plans also offer flexible bonus payouts. Such plans allow complete flexibility towards receiving bonuses in cash from the end of the first policy year and so forth. This feature affords immediate liquidity and accumulation for long-term wealth creation.
  • Continuance benefit: One of the major concerns of someone with dependents is to ensure their family’s financial stability even in their absence. Traditional life insurance plans offer inbuilt policy continuance benefit that waives off the future premiums in case of an eventuality. This ensures financial safety for the loved ones even in the policyholder’s absence.
  • Enhance your cover: Traditional life insurance plans can be customized to enhance the protection aspect through suitable riders which are available to the policyholder at a nominal additional cost. A customized life insurance policy is able to absorb financial shocks that are specific to you and your lifestyle by providing guaranteed income and protection.
  • Tax-free returns: With traditional life insurance, a policyholder receives a tax-free fund value plus bonuses. The tax-free nature and guaranteed returns of a traditional plan is suited for people who prefer investments that are not subject to market gyrations.

Traditional life insurance savings plans allow the policyholders to secure their now and plan for their financial future. These plans are low-risk investments that support wealth creation needs at various life stages.

 

The author is Chief Actuarial Officer at Aditya Birla Sun Life Insurance. Views expressed are that of the author.

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