What is the Difference between Life Insurance and ULIP?
"I would refer you to this question and answers. Here in the US we have two basic types of life insurance: term and whole life.  Universal life is a marketing response to whole life being such a bad deal, and is whole life just not quite as bad. I am not familiar with the products in India, but given the acronym (ULIP), it is probably universal life, and as you describe is variable universal life.   Likely Description ""Under the hood"", or in effect, you are purchasing a term life policy and investing excess premiums in a collection of stock mutual funds.  This is a bad deal for a few reasons: A much better option is to buy ""level term insurance"" and invest on your own. You won't necessarily lose money, but you can make better financial decisions.  It is good to invest, it is good to have life.  A better decision would not to combine the two into a single product." ULIP insurance plan ULIP is Unit Linked Insurance Plan. The premium you pay, a small part goes towards covering life insurance. The Balance is invested into Stock Markets. Most ULIP would give you an option to choose from Debt Funds [100% safe buy low returns 5-7%] or Equity [High Risks, Returns can be around 15%]. Or a mix of both. ULIP are not a good way to save money. There are quite a few hidden fees that actually reduce the return. So notionally even if returns shown are great, in effect it is quite less. For example the premium you pay in first year, say Rs 10,000/- Rs 2,500/- goes towards commission. And say Rs 100 goes towards insurance. Balance Rs 7,400/- units are purchased in your account. Even if these grow by 20%, you are still in loss. Ofcousre, the commissions go down year after year and stop at 5%. Then there is fund management fees that you don't get to see. There is maintenance fee that is deduced from your balance.  Thus the entire method of charging is not transparent. Life insurance from LIC There are broadly 2 types of Life Insurance plans Money Back / Endowment Plan. The concept here is again same, you pay a premium and part of it goes toward Insurance. The balance LIC invests in safe bonds. Every year a bonus is declared; generally less than Bank rate. At the end of the plan you get more than what you paid in premium. However if you had kept the same in Bank FD, you would have got more money back. So if you die, your nominee would get Insurance plus bonus. If you survive you get all the accumulated bonus. Pure Term Plan. Here the premium is quite less for the sum insured. Here if you die, your nominee would get insurance. If you survive you don't get anything.
"Disclaimer: I work in life insurance, but I am not an agent.   First things first, there is not enough information here to give you an answer.  When discussing life insurance, the very first things we need to fully consider are the illustration of policy values, and the contract itself.  Without these, there is no way to tell if this is a good idea or not. So what are the things to look for? A. Risk appetite.  People love to discuss projections of the market, like for example, ""7-8% a year compounded annually"".  Go look at the historical returns of the stock market.  It is never close to that projection.  Life insurance, however, can give you a GUARANTEED return (this would be show in the 'Guaranteed' section of the life insurance illustration).  As long as you pay your premiums, this money is guaranteed to accrue.  Now most life insurance companies also show 'Non-Guaranteed' elements in their illustrations - these are non-guaranteed projections based on a scale at this point in time.  These columns will show how your cash value may grow when dividends are credited to your policy (and used to buy paid-up additional insurance, which generates more dividends - this can be compared to the compounding nature of interest).   B. Tax treatment.  I am definitely not an expert in this area, but life insurance does have preferential tax treatment, particularly to your beneficiaries. C. Beneficiaries.  Any death benefit (again, listed as guaranteed and maybe non-guaranteed values) is generally completely tax free for the beneficiary. D. Strategy.  Tying all of this together, what exactly is the point of this?  To transfer wealth, to accrue wealth, or some combination thereof?  This is important and unstated in your question. So again, without knowing more, there is no way to answer your question.  But I am surprised that in this forum, so many people are quick to jump in and say in general that whole life insurance is a scam.  And even more surprising is the fact the accepted answer has already been accepted. My personal take is that if you are just trying to accrue wealth, you should probably stick to the market and maybe buy term if you want a death benefit component.  This is mostly due to your age (higher risk of death = higher premiums = lower buildup) and how long of a time period you have to build up money in the policy.  But if a 25 year old asked this same question, depending on his purposes, I may suggest that a WL policy is in fact a good idea." "You are kind of thinking of this correctly, but you will and should pay for insurance at some point.  What I mean by that is that, although the insurance company is making a profit, that removing the risk for certain incidents from your life, you are still receiving a lot of value.   Things that inflict large losses in your life tend to be good insurance buys.  Health, liability, long term care, long term disability and property insurance typically fall into this category.   In your case, assuming you are young and healthy, it would be a poor choice to drop the major medical health insurance.  There is a small chance you will get very sick in the next 10 years or so and require the use of this insurance.  A much smaller chance than what is represented by the premium.  But if you do get very sick, and don't have insurance, it will probably wipe you out financially.  The devastation could last the rest of your life.   You are paying to mitigate that possibility.  And as you said, it's pretty low cost.   While you seem to be really good at numbers it is hard to quantify the risk avoidance.  But it must be considered in your analysis. Also along those lines is car insurance.  While you may not be willing to pay for ""full coverage"" it's a great idea to max out your personal liability if you have sufficient assets." "It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns.  The following tips, aimed at those under 40, can help you approach and simplify the estate planning process:  Start now, regardless of net worth. [Estate planning](http://money.usnews.com/money/personal-finance/articles/2013/09/19/estate-planning-tips-for-people-under-40) is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. ""Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'"" he says. ""Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important.""  This is especially true if you are responsible for financially dependent individuals, such as young children. ""The less you have, the more important every bit you've got is to you and the people you care about,"" says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. ""If you don't have much money, you really can't afford to make a mistake.""  Have the ""what if?"" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you.  ""We find that the best transitions and financial transfers happen when all family members are involved in the [decision making](http://corlisslawgroup.com),"" says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. ""This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions.""  Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process.  In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. ""Young people can't afford to die,"" he says. ""They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan."" Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals.  Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. ""Don't feel like you have to jump at the first person whose name is given to you,"" Kirchick says. ""I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on.""  According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location.  Continue to review your plan over time. Finally, your estate plan should never be a ""one and done thing,"" according to Henn. ""Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children,"" he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place." "In the Netherlands specifically, there are several reasons to pay extra off on your mortgage. First, house prices have dropped significantly in the last several years.  They are rising slowly now, but it's region specific and you can still borrow more than 100% of the price of the house.  Under these conditions, if you choose to sell your house and the outstanding mortgage amount is greater than the value of your house, you are left with a gap (restschuld) to finance.  I think the rules have changed recently around this, allowing you to finance this gap with a new mortgage, but this is not a good idea.  The tax implications of this are likely to be complicated in the long run and your new house may not cover this gap for some time. Second, the less you owe on your house, the lower mortgage rates you can get.  Mortgages in the Netherlands usually fall into categories based on percentage of the auction price at a foreclosure sale (executiewaarde).  If you pay more of your mortgage off, you may qualify for a lower interest rate, possibly making refinancing interesting.  This is especially important if interest rates continue to drop but the value of your house does not increase or even decreases. Third, if you choose to keep your house and rent it out, the banks in the Netherlands have very strict rules on this if you want to do it above board.  I've read that some banks require the mortgage amount (NB not the value you may have built up in a linked savings or insurance account) to be less than 50% of the foreclosure auction price (executiewaarde).  Also, related to point 2, if you have something other than a linear or annuity mortgage, you will need to refinance to do this as the tax advantages around savings mortgages ([bank]spaarhypotheken) do not apply if it is not used as your own residence. Finally, if you choose to sell and you are in the happy position of having the value of your house be greater than the value of your mortgage (you have an overwaarde), there may still be some obstacles.  Any value you have accumulated in a linked savings or life insurance account is not available until after you sell your house.  Extra value derived purely from the difference between mortgage value and sale price may be easier to deal with. EDIT: As a final note, I've made extra payments on both a ""Spaarhypotheek"" (linked life insurance) and a ""Bankspaarhypotheek"" (linked savings account).  In one, the principal paid each month reduced and the mortgage lifetime stayed the same.  In the other, the principal paid each month stayed the same and the lifetime reduced.  In both cases, interest payments were less each month.  I would contact your mortgage provider to understand what the expected impact of extra payments will be." Without knowing the WSC's objectives, priorities of those objectives and affordability we cannot determine which type of insurance is best. Life insurance for seniors is very expensive if you examine the per unit cost (e.g. cost per $1000 of death benefit). Therefore affordability is a critical deciding factor for WSC.  Let's assume that we know the WSC's affordability and therefore the monthly premium is a fixed determined number, then there is a inverse relationship between the length of coverage and the amount of coverage. We have to achieve a balance between these two factors to best meet the WSC's objective. If the proposed plan is not affordable then the WSC must leave out his/her objectives with lesser priorities out of the total coverage amount. Actually, most insurance policies DON'T have a cash value if you don't make a claim.  The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance.  With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance. My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection. This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company. "CFP stands for ""Certified Financial Planner"", and is a certification administered by the CFP board (a non-government non-profit entity). This has nothing to do with insurance, and CFP are not insurance agents. Many States require insurance agents to be explicitly licensed by the State as such, and only licensed insurance agents can advise on insurance products. When you're looking for an insurance policy as an investment vehicle, a financial adviser (CFP, or whatever else acronym on the business card - doesn't matter) may be helpful. But in any case, when dealing with insurance - talk to a licensed insurance agent. If your financial adviser is not a licensed tax adviser (EA/CPA licensed in your State) - talk to a licensed tax adviser about your options before making any decisions." There is a subtle difference.  In an FDIC insured bank account, you are guaranteed to get all of your money back out. If you put $1000 into your bank account, you are guaranteed to be able to get at least $1000 back out when you want. The value of the account (in dollars) can never go down, for any reason.  When you put money into a brokerage account, cash is typically invested in a money market fund. Money market funds are considered very safe investments, with low risk of loss (and a corresponding low rate of return).  However, it is possible for the value of a money market fund to go down, and SIPC insurance does not cover that.  What SIPC does cover is any sort of shenanigans that a broker might play on you. If they screw up and delete your account, or give your money to someone else, or close up shop and head to Grand Cayman, SIPC ensures that you will get your money back. But it does not cover investment losses.