How Can Endowment Plans and ULIPs Help in Planning Your Retirement?

9-July-2021 |

 A comprehensive retirement plan is the cornerstone of every financial road map. You cannot plan for your retirement overnight. For steady wealth creation, it is essential to invest in financial tools such as a ULIP policy early on in your career to secure a comfortable and stress-free retirement.

ULIP insurance and endowment plans are among the most favoured investments as they combine the benefits of insurance and investment under a single plan. A well-planned retirement ensures that you don’t have to resort to borrowing money in the vulnerable stage of your life when you don’t have a steady income to address your everyday needs.

However, before making investment decisions, it is essential to ensure that the financial policies are understood, and all ambiguity concerning them has been cleared to prevent regretting investment decisions.  

 

What is a ULIP Policy?

The objective of a ULIP (Unit Linked Insurance Plan) is to help you build a corpus for your future along with providing an insurance cover. As a ULIP policy is a long-term investment, it is highly suitable as a retirement plan.

Similar to term insurance, a ULIP policy requires regular investments in the form of premiums that are paid to the insurance provider by the policyholder. A part of this premium goes towards ULIP insurance which promises a death benefit to the nominees of the policyholder in case of the latter’s untimely demise. The other half of the premiums are invested in market-linked returns. These include equity, debt, and combination funds.

Equity funds include investment in company stocks and garner the highest returns, but it is categorised as a high-risk investment. Debt investments are the safest, where the premium is poured into government assets, but the returns are low compared to equity. Finally, as the name suggests, combination funds are where the policyholder can decide the amount to be invested in equity and debt based on their risk appetite.

A ULIP retirement plan can act as an income replacement when you no longer have a job. It can help you achieve your financial goals with ease by building a steady corpus for your future.

 

Why Make a ULIP Investment?

Inadequate retirement planning can result in sacrificing your dreams in the twilight years of your life. To meet the expenses post-retirement, it is wise to build a pension fund that will support your lifestyle. Here is why early investment in a ULIP policy is a wise financial decision:-  

 

  • Higher Returns: Security and returns are the primary concerns while making any investment. A ULIP investment promises both of these. The average returns that come from ULIPs are higher than other investment alternatives, including that of a retirement endowment plan. The reason behind the lucrative nature of a ULIP investment is that the premiums are directed towards market-linked returns.

  • Investment Options: ULIPs consider the diverse investment needs of every individual and are sensitive to the risk profile of investors, which makes them so unique. A potential investor gets to choose whether to invest in equity, debt, or combination funds based on their financial goals and corpus requirement.

  • Insurance: Insurance is an important component of every financial plan. When one invests in a ULIP policy, a part of the premium goes towards ULIP insurance. This ensures the financial security of your loved ones in your absence. Tata AIA policy covers you up to the age of 75 to ensure that your family is taken care of even in your absence.

  • Flexibility: If your investment is not getting the desired results, ULIPs allow you the option to switch between your funds to optimise your returns. Usually, in the initial phase of investment, people choose equity funds for higher returns, and as they move closer to their financial goals, they shift their funds in debt or combination for greater security. The same applies when the market is comparatively volatile.

  • Riders#: ULIP insurance can be strengthened with riders# for an added layer of protection. They come with a slightly higher premium amount. 

 
What is an Endowment Plan?

Endowment plans combine insurance and investment to provide guaranteed1 returns. An endowment policy takes saving a step further to transform it into a regular habit instead of doing it intermittently. Usually, savings become meagre with luxurious spending, and when retirement nears, individuals have very little to rely on. However, with early investments in a retirement endowment plan, one can build a corpus for their future.

Endowment plans help the policyholder save regularly for a specified duration so that they can get a lump sum upon maturity or a death benefit to the nominees upon the unfortunate demise of the policyholder.  

 

Why Invest in an Endowment Plan?

Here are the reasons why it is advisable to invest in an endowment plan for financially securing retirement:-

 

  • Guaranteed1 Returns: Whether it is maturity, policy survival, or death, endowment plans promise guaranteed1 returns. The returns are provided regardless of the market performance as opposed to a ULIP retirement plan.

  • Policy Bonus2: If a participating policy has been chosen, the insurance provider distributes a part of their profit as bonuses2 to the policyholder. Both simple reversionary and terminal bonus2 are added to the cover.

  • Achieving Long-Term Goals: As wealth creation is the primary objective of an endowment plan, it helps the investor achieve their long-term financial goals such as building a house, paying for a child’s higher education, or planning for retirement. 

 

ULIPs, as well as endowment plans, can help you during your retirement. Choosing a policy depends on your financial requirements and risk appetite. ULIPs give market-linked returns and involve market risks. Alternatively, endowment plans are non-linked investments and meant for assured wealth creation.

To Conclude


We know the importance of saving for a rainy day. However, saving alone is not enough for your retirement plan. Savings can often get compromised with the requirement of contingency funds, such as medical emergencies, paying for your child’s higher education, etc. On such occasions, you put your retirement planning in the back seat, which can leave you on unsteady financial grounds in the future. To prevent this from happening, it is important to invest in a retirement endowment plan or a ULIP policy early on in your career.

 

L&C/Advt/2021/Jul/1113

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and they will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication; however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums, and exclusions under the riders, please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.

  • 2These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid.

  • IN THIS POLICY, THE INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisors.