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personal finance | IST

Money Money Money: Experts on types, benefits of non-term life insurance policies

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In the special show Money Money Money, CNBC-TV18 looks at all the other types of insurance policies and asks experts -- whether you should consider any form of market link policies or traditional plans, as they are called, at all when it comes to insurance and investment needs.

Experts say term insurance is the simplest and purest form of life insurance that perhaps everyone needs to provide cover and protection for dependents. This market wisdom is widely accepted across personal finance circles.
In the special show Money Money Money, CNBC-TV18 looks at all the other types of insurance policies and asks experts -- whether you should consider any form of market link policies or traditional plans, as they are called, at all when it comes to insurance and investment needs. To answer these questions, the channel caught up with Rahul Agarwal, CEO, Ideal Insurance and Harshvardhan Roongta, CFP, Roongta Securities.
On non-term insurance policies, Agarwal said earlier people used to buy traditional plans that were like endowment and money back. These were primarily savings driven with less cover but the main idea was savings and tax benefit, he said. Then Unit Linked Insurance Policies (ULIPs) became popular between 2000 and 2010. These went out of favour because of very high charges but are now back with reduced charges, he explained.
Agarwal said there are different types of traditional plans, which offer savings and risk cover. These products depend on the proportion of savings amount and the risk cover amount. Money-back is a product, which has the highest savings but the least component of risk cover. Endowment policy, on the other hand, has 50 percent of savings and 50 percent of risk cover. The third, Agarwal said, is Whole Life in which the risk cover is more and savings portion is low. These plans are basically very similar, just the proportion of savings and cover is different, he said.
Commenting on the three policies Roongta said, endowment essentially is that a payout is made at one lump sum at the time of maturity of the policy. Money-back would give a policyholder returns every possibly five years until maturity, so at regular intervals and in a whole life policy, the payment is made after the demise of the policyholder, he explained and added that some people plan the whole life policy towards the legacy.
For more details, watch the accompanying video