Traditional plans are the oldest kind of insurance plans that are available in the market. For those, who seek lesser risk, these are the most ideal insurance plans. Although older, there is still a lot of misunderstanding about the plan.
These are considered to be risk-free and one of the safest plans. If you are wondering how then let us have a detailed look.
Traditional insurance plans
offer fixed returns to the insured at the time of maturity. In case of death, fixed returns are offered to the nominee. Along with this, there is also an ensured safety of funds as the investment guidelines (by IRDA) offer a cap on equity investments. The investment risks here are borne by the insurance companies, making it even more profitable for the buyers.
When compared to market-linked insurance plans, traditional plans are less volatile, resulting in higher stability. These plans are protection-oriented. There is lesser dependence on the external factors, making it easily comprehensible as well as almost risk-free.
Who is the most ideal buyer of these plans? The answer could be, anyone. However, these are more suitable if you have a low-risk appetite. In other terms, if you are not financially prepared to take risks, then opting for low-risk plans like traditional insurance is advisable. These plans are also perfect for those with interests in long-term saving. It offers the benefits of both, protection as well as guaranteed returns to the passive investors. Through this plan, you get a guaranteed sum along with a bonus at maturity, if applicable. For those who wish to create assets, its feature of long-term investment is ideal. Another major benefit of these plans is that it is difficult to mis-sell them, owing to its feature of assured returns. However, in traditional plans, usually, the option of partial withdrawal is not offered.
There are primarily two kinds of plans — Endowment Insurance Plans and the Whole Life Insurance Plans. Broadly, they constitute features like as life insurance cover, returns, guarantees, safety and tax benefits.