Can a high sum-assured Ulip offer better cover, returns?
Most insurance policies that mix life insurance and investment offer neither adequate life cover nor good investment returns. The sum assured multiple in TULIPs could be 100-200 times of the annual premium, depending on the combination of the policyholder’s age, policy term and premium payment term). Data from Kotak Life Insurance shows that a 35-year-old paying a premium of ₹1 lakh for 10 years in a 40-year policy term will get ₹70 lakh on maturity, considering investment growth at 8%. “TULIP works better than a MF and term insurance combination for a longer tenure when compared at the same investment value and horizon because of loyalty additions on maturity," says Trivedi of Kotak Life. The internal rate of return will come in at 5.87% due to different charges getting deducted from the investment value such as fund management charges, policy administration charges, and premium allocation charges, among others.
Should you invest in a long-term insurance product that gives guaranteed returns?
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