Insurance for Equity Linked Policies| Definition And Benefit

Insurance for Equity Linked Policies| Definition And Benefit

Life insurance premiums constitute a really large pool of funds. There are unit trusts, namely an association of investors, who would find it profitable or convenient to utilize the pooled resources, and savings, for investment in securities. In this respect, certain life policies are equity-linked in the sense that a large part of the premium (sometimes up to 9%) is pooled for investment. The remaining part is then used to provide, say a term assurance to the policyholder.

Those type of insurance is heavily influenced by tax regulations and budgetary changes. It is an area in which expert advice is greatly needed. Equity-linked – policies are sometimes called investment-linked life policies.

Benefits of equity-linked insurance policies

the following are the major benefits of an equity-linked policy

1. In the area of increasing life expectancies and the population facing the need for sustainable income, the demand for
guaranteed income after retirement offered by equity-linked contracts is important and very beneficial to the retiree in terms of taking good care of his household needs during retirement.

2. Profit Oriented: Equity-linked policy makes it easier for some group of investors to unite and pool their resources for investment which end up generating a huge income for them at the end of the investment period.

3. It encourages saving

4. Investment motivated

5. Equity-linked policies bring about unity and trust among the associated individuals to the contract.

6. Equity-linked policy perves a way for investment in ordinary shares for the benefit of the beneficiaries of the policy.

Finally

Equity-linked policies are most often called “Investment-linked policies”. It is a life insurance contract whereby the proceeds of the contract are directly linked to the value of an investment portfolio, typically composed of units of one or more mutual funds and kept separate from the other assets of the insurance company.