The Indian economy is known as a young economy where the majority of the investors are in their 20s and 30s. In such a scenario, it isn't surprising that the policyholders prefer to opt for ULIPs and other market linked insurance plans over the traditional policies. However, even after saying this, it cannot be denied that the traditional plans have some great benefits that make them extremely bankable options. And even though Endowment Plans may provide lower returns as compared to ULIPs, the risk-free nature and stability offered by these policies outweigh a lot of features offered by the ULIPs.

Benefits of traditional plans

Risk free - This is the biggest and perhaps the most attractive feature of a traditional insurance policy. The traditional policies - endowment plans and money-back plans are almost completely free of risk. The sum assured is fixed and you get the amount, that was pre-decided, when the policy matures or in the event of death. The performances of the market-linked plans depend greatly on the functioning of the stock markets. ULIPs were growing in popularity and even threatened to take over the market share of the traditional policies, but after the markets crashed in 2008 and 2009, their popularity dwindled and more and more people ever since are opting for the safer features of the traditional plans.

Creation of funds - Since most of the traditional plans are long term, it helps the policyholder to build up a fund. Except for money-back policies, all other traditional plans make you save regularly and prevent you from making withdrawals. As a result, the fund builds up and at the time of maturity (or death) you get a hefty sum of money.

Premium payment - There are many flexible options for the payment of premiums. The policyholder can choose to pay the premiums yearly, bi-yearly or quarterly, depending on his/her ability. Limited premium payment options are available too where the policyholder can choose to pay the premium sum of the entire policy within a limited term and then enjoy the benefits of the policy for as long as it is valid, without having to worry about annual payments.

Fixed rates - The rate of interest, rate of return and premium amounts are all fixed at the commencement of the policy. These rates are determined after considering the age, income, etc of the policyholder. Therefore there is no room for discrepancies and underhanded activity by either the insurer or policyholder.

The traditional plans, though criticized for being low-return yielding tools, have some undeniable benefits. For a conservative investor who doesn't want to risk his or her saving, these plans are ideal. They shield the policyholder from unexpected market crashes, volatile investment trends and unreliable bonuses. So if you too are looking for a risk free investment-cum-cover option, check out the traditional policies. There is a whole lot to choose from and you will end up with a lot of benefits. Ask your insurance agent about the various policies available or compare the policies online.

The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal

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