Should I withdraw unit-linked insurance ahead of time?

Should I withdraw unit-linked insurance ahead of time?

The table illustrates the portfolio adjustment of a target date fund in a unit-linked insurance plan.

According to statistics from the Vietnam Insurance Association, unit-linked insurance accounts for approximately 22% of the number of new exploitation contracts in 2022, an increase of 57.2% compared to 2021.

Why does unit-linked insurance attract customers?

The more popular stock market in recent years is one of the factors that attracts Vietnamese customers interested in learning about unit-linked insurance products. Mr. Ngo Trung Dung – Deputy General Secretary of the Vietnam Insurance Association – commented: “Users today when participating in insurance packages not only have a need to be protected or accumulate, but also want to increase their assets.” assets through investment. Unit-linked insurance products that help meet this need will become increasingly popular with many people.”

Some products on the market today are also linked to target-date funds designed for each withdrawal time, corresponding to each future financial goal. These funds take advantage of high profitability from stock assets, while minimizing risks over the years by gradually adjusting the portfolio proportion to bonds and monetary instruments.

Unit-linked insurance is a special type of life insurance that allows customers to receive both protection and investment benefits in the same insurance contract. In particular, after deducting the initial fee, management costs and risk insurance fees, the remaining fee is invested by the insurance enterprise in accordance with the law and strict investment management processes. of insurance companies.

Long-term factors in unit-linked insurance investment

Unit-linked insurance is one form of investment that comes with insurance benefits for investors. If the investor is unlucky enough to get sick, have an accident, or die, they can receive compensation up to 100 times the annual entrusted amount.

In addition, unit-linked insurance is designed specifically for subjects with small capital and not much experience in the financial market. Entrusting investment funds to financial experts will limit the risk of loss compared to individuals directly investing in securities and increase profitability significantly in the long term, according to investment rate statistics. investment from insurance company-linked funds since 2016.

Choosing unit-linked funds that allocate heavily to stocks and have a high expected rate of return, investors need to be willing to accept a corresponding level of risk when the market goes down. In return, if the level of risk tolerance is low, investors can prioritize funds that allocate assets to bonds and deposits with lower and more stable expected returns.

However, with any type of fund chosen, unit-linked insurance is generally designed for customers to accumulate and make long-term financial investments. This helps them overcome market fluctuations, as well as balance the insurance costs they have to pay in the early years.

When participating in unit-linked insurance, customers will enjoy the entire investment results, and at the same time bear all certain risks in investing because the profits of linked funds are not guaranteed and the value of the funds is not guaranteed. Fund units may increase or decrease based on actual investment results.

The future of unit-linked insurance

In the context of the current financial market showing signs of decline, many customers are worried and want to withdraw money from investment channels, including withdrawing money or stopping paying unit-linked insurance premiums. . Faced with this reality, Mr. Dung gave some advice to those who own linked insurance products.

“Panic and termination or delay of existing insurance contracts will cause you and the insured to lose both protection benefits and the amount of premium deducted from the allocation for insurance activities. This will be a loss in both the short and long term. Meanwhile, in the current context, having a defense tool is very necessary,” said Mr. Ngo Trung Dung.

Accordingly, it is also important to understand that, if the insurance contract is canceled before its maturity date, the insurance company will not be able to refund the entire initial premium paid to the customer, but can only refund the asset value. amount up to the time of making the request to cancel the contract, Mr. Dung added.

“The long-term picture of Vietnam’s economy and financial market is still evaluated positively. This is an opportunity when investors can buy investment assets at low, attractive prices to then receive high growth in the coming years,” Mr. Dung said.

In fact, in previous periods of volatility such as the 2009 financial crisis, Brexit or the Covid-19 pandemic, the market went down but still recovered and returned to high growth. In particular, the Vietnamese stock market is being priced attractively in 2023 with many prospects and is in a high growth period for at least the next 5 years. This is a suitable period to start or continue investing in linked insurance when asset value and growth potential are at a more attractive level than before./.

According to zingnews.vn