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  • How to read a benefit illustration of a ULIP policy

    How to read a benefit illustration of a ULIP policy

    A life insurance policy protects you and your loved from the various uncertainties of life. Basically, it covers you from life risk. This cover is in the form a life cover that you, as a policyholder, get when you purchase a life insurance policy. One of the types of life insurance policies is the ULIP policy. This policy provides the dual benefit of investment and life insurance cover to the policyholder and their loved ones. Depending on your requirements, there are different types of ULIP policies to choose from. If you are planning to buy this policy, it is important that you read the benefit illustration of your respective policy. Read on to understand more about ULIP and its benefit illustration (BI).

    What is ULIP policy?

    When browsing through the different life insurance products, you might come across a product called ULIP. What is ULIP policy? ULIP, which is short for Unit Linked Insurance Plan, is a life insurance policy that allows the policyholder to gain wealth through investments. However, it also offers the policyholder life insurance cover from different life risks. The premium that you pay towards the policy is split into two: half is diverted towards the life cover and the other half is used for investments. You can invest in equity funds, debt funds or in both based on your risk appetite and life goals.

    What are the types of a ULIP policy?

    ULIP policies are based on the types of funds under the policy for investment. The types are:

    1. Equity funds: Investments are made in stocks of market-listed companies. This fund has a huge risk factor and offers higher returns. It is usually the choice of people who have a higher risk appetite.
    2. Fixed income funds: Investments are made in government securities and bonds and corporate bonds that allow a fixed steady income. This fund carries low risk and offers low-to-medium returns.
    3. Liquid funds: Investments are made in cash funds, money markets, and bank deposits. This fund carries a low risk factor and offers low returns as compared to equity and debt funds.
    4. Balanced funds: Investments are proportionately balanced between equity and det funds. This lets the investor get good returns without a high-risk factor.

    Which fund should you opt for?

    Depending on what your life goal and objective is, the fund should match accordingly. If you want to secure the future of your child or your loved ones, investing in debt funds or balanced funds would be beneficial. If your goal is wealth creation, you should opt for equity funds due to its high returns. 

    What is a benefit illustration?

    As per the IRDAI mandate, life insurance companies are required to provide benefit illustration to the interested buyer. Benefit illustration of a ULIP gives the customer an idea about things such as how the premium they pay would get invested, what would their returns be based on the growth of their funds and what charges would be applied. It also helps the customer get an idea about how their funds will grow during the term of their policy.

    How to read a benefit illustration?

    The benefit illustration of your policy contains many terms that you may find confusing at first. However, they are quite easy to understand. Here are the main terms that you should be aware of when reading a benefit illustration:

    1. Policy year

    This shows you the time period of your policy and how long you will be invested in the ULIP policy that you purchase.

    1. Premium

    This shows you the amount of premium that you will be paying towards the policy on an annual basis.

    1. Allocation charges

    Allocation charges are applied on the premium that you pay for the policy.

    1. Policy administration charges

    These charges get deducted from the fund value of your policy. The charges could either be fixed or can be variable.

    1. Management charges

    Your insurer charges you for managing your funds for the duration of the policy. These charges are known as fund management charges.

    1. Yield

    Yield is the amount that you gain in returns from your ULIP policy. These returns are calculated at 4% and 8%, based on the mandate set by the IRDAI.

    1. Surrender value

    This shows the amount that will be paid to you if you surrender your ULIP policy before the date of maturity. Do keep in mind that ULIPs have a lock-in period of 5 years.

    When you plan on purchasing a ULIP, always remember to ask for the benefit illustration for your policy from your insurer. If you plan to buy a ULIP online, you will be able to check the benefit illustration on your system itself.

     

  • 4 Ways Seniors Benefit by Selling their Unwanted Life Insurance Policy

    4 Ways Seniors Benefit by Selling their Unwanted Life Insurance Policy

    Each year in the US upwards of 1,000,000 seniors lose more than $112 billion because they allow their unwanted life insurance policies to lapse. Maintaining these policies is not compulsory, however, many people over the age of 60 continue to pay expensive premiums even though they could benefit better from using their cash in a different way.

    It is possible to sell your unwanted life insurance policies for a large cash settlement, this type of arrangement is sometimes referred to as a life settlement. In the past, life settlements have been a prolonged procedure that can be time-consuming and off-putting. These days, companies like Mason Finance offer a fast and efficient service that can be up to 12 times faster than the industry standard.

    For the average person, selling a life insurance policy can lead to an upfront cash settlement of up to 20% of the complete policy size. That is potentially a huge lump sum as you can sell a life insurance policy worth over $50,000 in face value, money that you otherwise may not ever have access to. These life-changing sums could be available to any life policyholder right now, so if you’re considering cashing in your current policy, consider these four ways seniors can benefit from selling their unwanted life insurance policies below.

    Cover Medical Expenses.

    Unexpected or sudden medical bills can be expensive. In fact, in America, the average healthy couple will spend upwards of $377,000 on health care during their retirement. You can help ease the cost of any future medical expenses by selling your life insurance policy, giving you peace of mind.

    Improve Quality of Life

    By eliminating premium payments and receiving a large cash settlement in exchange for your life insurance policy means you will much better off each month. When you consider an estimated 25,000,000 Americans over the age of 60 are living within or below the poverty level, this money can vastly improve your quality of life.

    Enjoy Leisure Activities

    It is a surprising statistic that 60% of retirees overlook budgeting for leisure activities when planning their retirement fund. As a result, many seniors can’t enjoy retirement to its full extent. Selling your life insurance policy can provide you with the extra cash you need to be able to partake in the more rewarding things in life like travel and visiting family and friends.

    Boost Cash Savings and Achieve Greater Financial Security

    As you can sell your life insurance policy for a large cash settlement, as well as ridding yourself of monthly premium payments, doing so will both boost your cash savings and provide you with greater financial security. Financial security in later life can allow you to enjoy life to the fullest and live more comfortably. If you already have healthy financial security, you could use the extra cash to treat your family.

    Visit Mason Finance for more information about how you can sell your unwanted life insurance policy today, and start enjoying a worry-free retirement.

  • How life insurance could serve as an inheritance

    How life insurance could serve as an inheritance

    Leaving an inheritance to their family may seem out of reach to many Australians. The latest ME Household Financial Comfort report (released June 2017) shows that nearly 25% of Australian households have no money saved for emergencies. Once funeral costs and other final expenses are factored in, many may be more likely to leave behind debt rather than an inheritance.

    Even for those with large estates, a planned inheritance can be chipped away at or delayed by taxes and legal fees. However, life insurance could allow you the freedom to spend your assets now and also leave behind an inheritance when you pass away.

    Avoid tapping into a planned inheritance

    Contrary to popular belief, spending does not appear to decline through a person’s retirement. A 2016 study by the Australian Centre for Financial Studies suggests that the yearly expenditures of Aussie retirees is relatively consistent.

    This may be an issue for anyone planning to leave a specific dollar amount to the beneficiaries of their will.Much retirement advice hinges on the assumption that you’ll spend less the older you get. But if spending remains more or less consistent, you may find yourself tapping into funds earmarked for a future inheritance to pay your bills.

    A life insurance policy can help supplement your estate. You can worry less about how much you’re spending in retirement, knowing your family could receive the insurance payout on top of any estate you do leave behind.

    Playing the waiting game                                                

    Even if you’re leaving an inheritance behind in other forms, it can take months for an estate to be settled. In Australia, the minimum time to finalise an estate is six months from the date of death.

    Why so long? The process of administering a final estate can be complicated. Once a will is located, the executor must meet with beneficiaries, determine the amount of assets and debts, and apply for probate before the estate can be distributed or trusts established. Most wills are sorted in about nine months, but more complicated estates can take years to fully settle.

    A life insurance payout can help your loved ones whilst they wait. Policies are typically paid out much sooner than an estate. The life insurance benefit can serve as a financial cushion, helping your loved ones financially until the bulk of their inheritance is received.

    Cover your funeral costs

    Helping cover final expenses is another way a life insurance benefit can serve as an inheritance booster.

    Funeral costs are on the rise, with services in Australia ranging anywhere from $4,000 to $15,000 or more. If you haven’t set aside funds to pay for a funeral, your family will likely need to cover the costs out of pocket. This can be “paid back” by any inheritance received once your estate is settled, but may put loved ones in a financial bind whilst they wait.

    Life insurance policies often offer an advance on the full payout specifically to help families quickly pay for funeral arrangements. You can also take out a funeral insurance policy, designed to help with the immediacy of funeral planning. Benefits are often paid within 48 hours of receiving the completed paperwork, providing families with peace of mind during a difficult time.

    Negotiating family politics

    The typical Australian family looks a lot different today than it did just a few decades ago. Divorce, remarriage and cohabitation are more common, with families often welcoming step-children, multiple grandchildren, de facto partners and new in-laws into their inner circle.

    A will is one way to stipulate who gets what after you pass, but they can be called into question. Almost anyone can contest a will. This can prolong the legal process of dividing the estate, and could fracture already tenuous family relationships.

    In these cases, a life insurance policy naming one or more persons as the beneficiary could be a tactful way to honour your relationships or supplement an inheritance. Life insurance policies are not part of a person’s estate unless the estate is specifically nominated as the beneficiary. By naming a spouse, family member or close friend as beneficiary, the payout will go directly to them, and can be kept separate from the contents of your will.

    Life insurance may not be the first thing that comes to mind when thinking about an inheritance, but as you can see, a policy could be a good option for creating or supplementing one. Take some time to consider your financial situation and what you want to leave behind for your family. A life insurance policy could be the tool you need to help protect their financial future, while also helping to form your legacy.