When you buy a life insurance policy, the insurer provides you with a benefit illustration. It presents the calculation of returns on your life insurance policy.
The policy benefit illustration should be reviewed very carefully. Here are a few points to keep in mind while reading it.
The most important thing to view is the guaranteed returns mentioned in the benefit illustration.
Earlier in March, Parliament passed a bill to raise the foreign direct investment (FDI) limit in the insurance sector from 49% to 74%.
Secondly, check if your policy offers variable benefits. If yes, this should be included in the benefit illustration table as well.
These benefits must show the corresponding fund value basis two different investment projection rates of return- 4% and 8% per annum.
Remember, these rates of return mentioned in the benefit illustration are not fixed. It solely depends on the performance of your investments.
Thus, you can very well get a higher or lower gross yield on your investment.
Meanwhile, in case of Ulips, the costs is clearly mentioned. The insurer will deduct charges from annual premium paid.
For Ulips, the policy benefit illustration will depict how these costs are deducted from the total premium paid every year. Here, only the portion of premium paid gets invested annually at the assumed rates of 8% and 4%.
For traditional plans, the amount received during maturity should also be guaranteed. Thus the benefit illustration will show how these mortality charges and GST are deducted from the total premium paid per year.
