Life insurance is an integral part of the financial planning process. While a financial plan takes care of one’s life goals, a need to have a protection cover is equally important. In fact, financial advisors suggest having insurance as the first step towards financial planning. In the current environment, when the world is struggling against the pandemic, the importance of life insurance has gained momentum.
And, new buyers need to understand why they need to buy protection covers. FE Online in an interview with Anjali Malhotra, Chief Customer, Marketing and Digital Officer at Aviva India, finds out what things one should consider while buying insurance and the difference in the types of insurance products available in the market.
Importance of life insurance has gained currency in recent times. Any specific trend that you are witnessing especially during the ongoing pandemic?
In the current context, we see an increase in demand for protection focused and guaranteed income insurance products. There are investors who do not want to live with the volatility that is inherent to equity markets. They prefer steady and predictable returns which come from traditional guaranteed products.
What is the approach of buyers while choosing between traditional insurance plans and Unit linked insurance plans?
Over the last few months, we have seen a significant increase in demand for guaranteed income products. This is because of volatility in the markets and a short to a mid-term scenario of uncertainty. The same factors have pulled down the demand for market-linked ULIP products. However, we believe that discerning customers understand that equity has short term volatility and staying invested over the long term will help them achieve their financial goals.
How should a buyer decide between an endowment and a unit-linked insurance plan?
The type of product you choose should be based on your goal or risk profile. If you are someone who looks at the policy value every day or every week, ULIPs are not the best instrument for you. Equity as an asset class has inherent volatility and if you get stressed looking at market movement, you should opt for traditional products. Insurers offer traditional endowment products with a guaranteed return and these are better suited to mindsets that want a steady growth of their funds and look for “guaranteed” returns over a specified period of time.
What things does one need to consider before finalizing a life insurance plan?
Protection is the bedrock of any financial plan. Thus, we must first factor in the risk appetite and ensure adequate cushion. Then we can identify life goals and choose a product that helps in meeting these goals. Once the product is identified, we should commit to it in a disciplined manner and remain committed to it throughout its term – only then can the intended benefit and returns from the product be achieved. Consult with a financial advisor if required, since they are able to customize solutions to your specific needs and life goals, such that you can have access to requisite funds at the exact time of its need.
