Choosing the right investment linked policy

Many young married men are the only breadwinners for their family so they are worried that their children and wife will face financial problems in case they are seriously ill, injured or die. Hence they are interested in purchasing insurance policies which will give a good return on their investment and also insurance cover. In these cases, the insurance buyer should read investment linked policy terms and conditions carefully to find a suitable policy. Some of the main criteria for choosing an insurance policy are discussed below, so that the buyer can compare the various policies which are available before choosing the right policy.

Insurance

Typically for an investment linked insurance policy, part of the amount invested will be used for paying the insurance premium and the rest will be invested in diversified funds to maximize the returns on the investment. It is advisable to check the percentage which will be used for insurance payment and the insurance coverage which will be offered. Insurance buyers with small children will often require more insurance coverage, to pay all the household expenses, while older persons with no dependents may not require much insurance coverage

Investment

Usually the insurance company will specify the minimum amount of premium which has to be paid for each insurance policy plan . The insurance buyer should ensure that he has sufficient funds to pay the premiums periodically, since the insurance company will often not refund the amount paid , if the insurance buyer does not pay one insurance premium on time. The insurance company will offer a number of investment options for the investor, based on his risk profile. Younger investors are often advised to invest in equity focused funds since they give better returns, while older investors usually prefer to invest in debt funds.

Payment period and frequency

The insurance company will also specify the period for which the monthly, quarterly, half yearly or annual premium has to be paid. Depending on the policy terms, the duration for which premium has to be paid may be 5,7, 10 or 20 years. So before purchasing a policy, the buyer should ensure that he will have sufficient funds to pay the premiums, since the insurance companies penalize those who do not pay the premium or delay premium payment. While those who have secure jobs will receive a salary or pension monthly, small business owners or professionals often find that they do not have sufficient funds due to factors beyond their control.

Other considerations

It is also important to check when the policy holder will get some or all the money which he has invested. Some of the insurance companies are repaying the policy holder monthly while others pay a lump-sum after a specified period. During a financial crisis, the policyholder may wish to withdraw some of the money he has invested in the insurance policy. In this case, he should check the terms and conditions , whether partial withdrawal is possible, penalties, procedure which has to be followed, and time taken for processing the request for withdrawal

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