Insurance plans with high returns are difficult to find, and even when you do find them, there are usually several restrictions, costs and regulations that must be adhered to before you can become truly profitable. This is why so many of us end up settling for plans with medium or low returns – we are simply unable to compete on the same playing field. We are seduced by all the glamour and glitz of insurance companies promoting their “big ticket” plans with huge returns. However, a quick glance at their financial statements would reveal that most of these big ticket policies pay out very little relative to the value of the premium. So if you are thinking about investing in life insurance, you might want to consider a more customer-centric approach.
What does this mean? It means that you should think about investing in insurance plans that have a lower premium relative to the value of the death benefit. It may sound like a strange suggestion – after all, isn’t “the best life insurance plan” the one with the biggest death benefit? The answer is no, especially when it comes to term insurance policies. If you think about it, the insurance company is always selling a policy that will only pay out the greatest possible return in the short term – and that includes death benefits.
So what makes a financial product attractive to investors? One of the things that most investors look for in any financial vehicle is “call flexibility”. For example, financial products that provide flexibility to adjust premiums according to changes in financial expectations, such as changes in economic conditions. Or even policy loans that can be renewed over again for a set period of time. These are all good things that most life insurance plans with high returns appeal to.
The easiest way to evaluate this flexibility is to compare the annual return on your high risk term life insurance plan with the return on an equivalent index of a similar financial product with a low risk factor. Of course, the comparison needs to be done without taking into account expenses or points of maintenance. That said, many people prefer index funds to “pure” annuities or other long term investment vehicles simply because they are less costly and tend to track better than non-track products do. So when you are comparing your insurance plans with those of an online insurance policy, you want to make sure that you’re comparing apples-to-apples. Otherwise, you could find yourself being overcharged.
When it comes to evaluating insurance plans with high returns for their underlying financial vehicles, there are several things that you should keep in mind. First, annuity payments should never be more than the accumulated cash value of the account. Any money that is paid out to beneficiaries should also never be greater than the cash value of the account. Simply put, never allow your insurance plans with high returns to crowd out your savings or investments!
For many people, they tend to forget about their ULIP premiums when they are comparing life insurance policy estimates. Remember, ULIP premiums can be ten times as high as the cost of a standard life cover! So make sure that you consider these premium costs when you are trying to get an idea of what your monthly payment will be. In fact, if you have a lump sum that you want to use to buy your ULIP, you should consider paying the lump sum on an annual basis rather than monthly. This will ensure that you don’t get caught in the annual rollover or redemption period and you will never pay more than the accumulated interest on your ULIP.