For years, Indian insurance seekers have been taken in by traditional life insurance products like endowment and money-back plans. But, after the sector was opened to private players, unit-linked insurance plans (ULIPs) pipped traditional products to the top spot.

Things, however, changed after September 1, 2010, when the insurance regulator capped Ulip charges. Now, traditional plans have again become popular. This is primarily due to the dwindling commission from Ulips, which has resulted in some agents and insurance companies milking the opaque structure of traditional plans to earn higher commissions while keeping customers in the dark. It is also a fallout of insurance seekers' tilt towards safe, assured-return products given the current market scenario.

Also, these could be seen as quasi-pension plans either without the 4.5% guarantee (or, as IRDA is considering, a capital guarantee) being offered. Finally, the increased demand for mutual fund MIPs (monthly income plans) may also be a cause for the shift."

REGULAR INCOME PLANS

It is hardly surprising then that insurance companies have stepped up their endowment plan launches this year, with a couple of them having launched monthly income plans in the past few weeks. "Our research revealed consumers were averse to taking risks and preferred guaranteed returns while planning for the long term. It also suggested a significant percentage of customers prefer a guaranteed cash flow for a regular income to achieve lifestage goals, and also to provide extra cushion against any unexpected increase in monetary needs," says V Viswanand, director and head, products and persistency management, Max New York Life Insurance.

The USP of such plans, insurers say, is they offer payouts at regular intervals post the premium-paying period. "They work much like the money-back policies, which are popular. Monthly income plans promise a regular inflow more often," says Rajeev Kumar, vice-president, product and pricing, Bharti-AXA Life Insurance.

HOW IT WORKS

Most monthly or regular income plans come with a limited premium-paying period after which the payouts begin. Typically, you have to choose the monthly income you would like to receive, and the premium will be calculated based on this figure. Besides monthly income, the policyholder may also receive any reversionary or bonuses upon the policy's maturity.

If the insured dies before the premium-paying term ends, dependants receive the monthly income from the anniversary following the date of death till the end of the payout term. If the death occurs after the premiumpaying term, the payouts will be as per schedule. While some companies choose to disburse any terminal bonus and a part of the sum assured as lump sum to the dependants, others may give bonus only at maturity.

THE FLIPSIDE

Like all traditional products, the charge structure could be more opaque than in Ulips. Traditional products also give you lower returns in the longer run compared with equity products. Also, the annuity is for a limited period only.

To understand the nuances of different types of policies and its price, feel free to seek the help of InsuranceMall to select the right products based on your need. Or you can directly call them on +91-22-30503050

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