When you work hard throughout your life, you are doing so to achieve your financial goals and help your family achieve their dreams. After spending a couple of decades working, you desire to retire peacefully and help your children with their future.
However, unlike a movie, your life is surely not scripted. Certain unplanned events and eventualities can entirely disrupt your financial planning and hamper the stability of your household.
While these events may be stressful, you can opt for life insurance policies that will help you deal with the financial aspect of it.
Life insurance policies will help you prepare for multiple eventualities. Term life insurance plans offer pure life cover to serve as the ideal income replacement in the case of the policyholder’s (a person or group in whose name an insurance policy is held) death.
Guaranteed(1) return insurance plans are great savings-cum-insurance instruments for low-risk investments as well as for retirement planning. Similarly, Unit Linked Insurance Plans (ULIPs) serve as investment insurance plans that aid wealth-building through market-linked investments. Finally, annuity plans are perfect retirement solutions.
Before investing, you may search thoroughly about the policies available and select a life insurance policy that seems suitable to you at that stage in your life. However, what you may fail to factor in is that your life may change drastically in a matter of years. This may result in you wishing for high requirements from your insurance policies.
Therefore, it is important to learn about the concept of an insurance portfolio and map the portfolio to your risk appetite (the level of risk you are prepared to take with your investments).
What is a Life Insurance Portfolio?
In an investment portfolio, stockbrokers generally rely on the concept of diversification. Diversification involves expanding the investment horizon by allocating funds to different asset classes and investment vehicles. A well-balanced portfolio helps the investor spread the risk across different asset classes.
So, even if one asset class underperforms, their other investments will handle the blow and protect the investor's funds. It's sporadic for investors to hold an investment portfolio with a single stock or bond.
Similarly, when planning your life insurance portfolio, it is important to spread your risk and employ multiple plans to take care of varied needs – saving, investment, and pure protection. Generally, you would hold on to the policy you purchased years ago. The policy may be a good plan and probably ensure you a decent coverage at affordable premiums.
Is this good enough?
But you must also consider the fact that your needs, requirements, and a factor called the 'Human Life Value' change exponentially with time.
Therefore, holding a life insurance portfolio filled with different policies is an excellent way to ensure the insurance coverage you get.
Learning how to use life insurance as an investment and getting multiple life insurance policies can be helpful. However, it is advised you also assess your investment risk profile when learning how to invest in life insurance.
How to Determine Your Risk Profile?
The risk profile is the quantification of the risk tolerance of an individual. Every person has a unique risk tolerance to the volatility they wish to have with their investments.
An individual's risk profile will depend on different factors like age, employment status, employment nature, personality, income regularity, capital base, etc.
An individual's risk profile will focus on their orientation. The steps involved in determining the risk profile include:
Learning about the risk profiles of asset classes and your capacity.
Matching investments to your investment horizon and understanding your tolerance.
Spreading the risk which you wish to take to achieve your financial goals.
Once you have followed these steps, you will get a clear picture of the amount of risk you can take. After learning about your risk profile, you can make the appropriate decisions for purchasing relevant insurance plans.
This especially helps when investing in ULIP plans or choosing between guaranteed(1) plans or market-linked insurance instruments.
Life Insurance Portfolio - If You Have Low-risk Appetite
If you are looking for insurance plans that will offer low risk, you can consider the plans listed below:
1. Guaranteed(1) Return Plans: Guaranteed(1) return plans are optimal plans if you have a low-risk profile. These plans provide death benefits along with maturity benefits. Here, the returns on the premiums paid are invested in low-risk avenues that guarantee(1) assured returns. With no volatile market-linked investments, the money is safe.
Plan suggested: You can opt for the TATA AIA Life Insurance Guaranteed Return Insurance Plan (UIN: 110N152V07) that allows you to save and meet your life goals with ease.
2. Term Insurance: Term insurance plans are pure insurance plans that provide a high sum assured to you. There is little risk involved in this plan.
The premiums paid assure a high sum return to you in case of any eventualities. If you wish some maturity returns as well, you can opt for a term plan with a return of premium.
Plan suggested: Go for Tata AIA Life Insurance Sampoorna Raksha Supreme (UIN:110N160V02) for extensive life cover at affordable premium prices, along with the assured return of the sum of premiums paid upon maturity with the Life Plus Option.
3. ULIPs With Debt Funds: ULIPs are excellent plans as they provide you with the benefit of both insurance and market-linked investment returns.
While low-risk investors avoid volatile market investments, ULIPs give you the option to opt for low-risk, low-return debt funds for investment. By investing in ULIPs with debt funds, you can get good returns with minimal risk.
Plan suggested: Tata AIA Life Insurance Fortune Maxima plan (UIN: 110L113V03) can be a good option here. With this plan, you can seamlessly shift your funds to low-risk avenues. Additionally, the plan offers lifelong protection up to 100 years of age and regular loyalty additions to the fund.
Life Insurance Portfolio - If You Have Medium-risk Appetite
1. Term Insurance: Term insurance plans are a must for insurance portfolios, as they are pure insurance coverage plans, and it is important to hold plans that provide high sum assured amounts.
Plan Suggested: You can choose the Tata AIA Life Insurance Sampoorna Raksha Supreme (UIN:110N160V02) plan for extensive coverage options, flexible premium payment, choice of payout (regular income or lump-sum), and attractive riders(#) to enhance the coverage.
2. ULIP With Hybrid Funds (Equity + Debt): ULIPs will provide excellent returns to you when the plan matures. Since you can deal with medium risk, you can opt for hybrid funds with equity and debt funds.
While debt funds are low risk, equities do carry a medium amount of risk. You can keep the equity proportion higher when the markets are stable. Once you feel the market is volatile, you can shift to debt-based investments.
Plan suggested: Tata AIA Life Insurance Wealth Maxima (UIN: 110L114V03) plan can be a good choice here. Enjoy dual advantages of lifelong cover and seamless fund shifts for your choice of investment. Also, get loyalty additions to the fund at regular intervals.
3. Guaranteed Monthly Income Plans: You can enjoy a percentage of the sum assured at regular intervals as regular income through guaranteed(1) returns. These plans can be a great instrument for your retirement planning as well.
You can use the ULIP investment for long-term wealth creation and the monthly income plan for your post-retirement financial security.
Plan suggested: Tata AIA Life Insurance Fortune Guarantee Plus (UIN: 110N158V01) is a great plan for medium-risk investors looking for regular income plans. You have the option to choose annual or monthly income options. You can also avail of a loan against the policy for emergency cash requirements. Additionally, you can opt for a plan variant with inbuilt critical illness benefit for all-round protection.
Life Insurance Portfolio - If You Have High-risk Appetite
1. ULIPs With Equity Funds: Equity funds are considered high-risk, so they're suitable if you have a high-risk profile. A benefit of high-risk funds is that they have the potential to offer a higher reward. If you have a high-risk profile, then opt for a ULIP plan and go for equity-heavy funds.
Plan suggested: You can go for the Tata AIA Life Insurance Fortune Pro (UIN: 110L112V04) for your ULIP insurance needs. The plan offers close to 11 funds to choose from. You can opt for an equity-based fund and ensure high returns on investments. You can also choose to make a lump-sum premium payment or pay it periodically for a limited period. Additionally, you get life cover up to 75 years of age and tax* benefits on the premium paid.
2. Retirement Plans: Considering you will invest in high-risk avenues, it is necessary to put some money aside for your retirement. You can choose an annuity plan to save for your retirement. With a one-time payment, you can choose immediate payouts or deferred annuity.
You can also opt for a guaranteed monthly income plan, wherein you save over the course of multiple years and get assured monthly income after retirement.
Plans suggested: The Tata AIA Life Insurance Smart Annuity Plan (UIN: 110N150V05) is optimal for retirement savings. You can get joint life cover, multiple annuity payout modes, top-up benefits to enhance cover, and loan facility for emergency fund requirements.
Alternatively, you can opt for the Tata AIA Life Insurance Guaranteed Monthly Income Plan (UIN: 110N147V02), wherein you can get a guaranteed(1) stream of income on retirement, along with a premium boost on monthly income on large premium payments. You can choose your premium payment frequency and avail loans on the policy for emergency requirements.
3. Term Insurance Plans: No matter your risk capabilities, term insurance plans should be a part of your insurance portfolio. The large sum assured helps your family sail through their lives without worrying about any liabilities or financial stresses. You can opt for the Tata AIA Life Insurance Sampoorna Raksha Supreme (UIN:110N160V02) for your needs.
Why Should You Opt For a Diversified Life Insurance Portfolio?
With a life insurance portfolio, you get more options for savings, protections, and passive income. Along with this, buying multiple policies will also help you deal with the different insurance requirements that you have as you grow older.
An insurance portfolio will help you deal with multiple situations like:
Financial goals
Inflation
Marriage
Children's future
Asset increase
Liability increase
Income changes
However, there's no compulsion to purchase all the plans together. You can purchase the plans as and when you think their requirement is imminent.
Also, please be careful about mentioning existing life insurance plans while purchasing any new plan offering life cover. As per regulations, the total sum assured offered by all your life insurance policies should not exceed the “Human Life Value,” which is determined by the insurance companies based on a range of factors.
Knowledge about previous coverage will help the life insurance provider offer you the right combination of plans for your specific circumstances and needs.
In Conclusion
Insurance policies are extremely beneficial for safeguarding your family's and your financial future. However, holding an insurance portfolio with multiple plans can help you get adequate coverage along with good returns.
Before planning an insurance portfolio, you must learn how life insurance works as an investment, as it will help you maintain your risk-return profile.
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Disclaimers
(#) Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums, and exclusions under the riders, please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office
(1) Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term, and Age at entry
(*) Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
Past performance is not indicative of future performance.
All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
Please make your own independent decision after consulting your financial or other professional advisor.
Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
Tata AIA Life Insurance Company Limited (IRDAI Regn. No.110 • CIN: U66010MH2000PLC128403). Registered & Corporate Office: 14th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400013. Trade logo displayed above belongs to Tata Sons Ltd and AIA Group Ltd. and is used by Tata AIA Life Insurance Company Ltd under a license. For any information including cancellation, claims and complaints, please contact our Insurance Advisor / Intermediary or visit Tata AIA Life’s nearest branch office or call 1-860-266-9966 (local charges apply) or write to us at customercare@tataaia.com. Visit us at: www.tataaia.com.
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