• Traditional Insurance Plans mainly provide a mix of security and savings advantages to clients. Common Traditional Insurance Plans include the Endowment Insurance Plans and the Whole Life Insurance Plans. These plans generally feature aspects like life insurance coverage, guarantees, returns, safety, and tax advantages. Traditional policies are regarded as risk-free since they deliver guaranteed returns in the event of death or policy maturity. Investment regulations established by the regulator (IRDA) also guarantee the security of funds by limiting equity investment for the underlying participating fund where all funds are allocated.

• Here are several reasons explaining how traditional savings insurance plans can be advantageous for you.

Customer comes first

• In plans where participation occurs, the company can only earn margins when the customer also achieves margins, which indicates that the interests of both the company and the customer are aligned. According to insurance law, the company is allowed to retain only 1/10th of the profits, with 9/10ths of the profits having to be shared with the customers. This is referred to as the “90/10” rule (As per IRDA (Distribution of Surplus, Regulations 2002) in the insurance sector. For illustration: If the company generates Rs 100 in profits, Rs 90 must be allocated to the customer first.

Investment risk is borne by the company instead of the customer

• In Unit Linked products, the investment risk is held by the customer. Conversely, in traditional participating products, this risk is carried by the company. Traditional Insurance Plans are suitable for customers who prefer to avoid risk and do not engage in managing the investment actively.

Easier to understand

• Traditional participating plans provide built-in guaranteed benefits, thereby making the ‘give and get’ equation easy to grasp. The product benefits are clearly defined from the beginning with fewer contingencies on external factors, resulting in an incredibly straightforward understanding of the product.
• Overall, Traditional Insurance Plans are an ideal choice for passive investors as they deliver both guaranteed returns and protection. If your investment goal is long-term savings combined with safety and guaranteed returns, then Traditional Insurance Plans represent the most suitable investment product for you.