How do I earn any bonus from a participating insurance policy?

livemint.com:

I am a homemaker with two children—aged six and nine. I want to plan for their future and start making investments for various goals such as higher education, coaching classes, marriage, etc. I have started investing in long-term insurance policies and mutual funds towards this end. When it comes to participating plans, I wanted to know how the cash value of a participating insurance policy grows over time? Also, as my financial situation evolves, can the coverage and premiums be adjusted over time?

—Name withheld on request

Being a parent comes with considerable responsibilities. Investing in the right assets will help you generate the necessary corpus for your children’s future.

A participating plan usually offers internal rate of returns (IRR) between 6% and 6.5%. The IRR may fluctuate based on your investment horizon and the financial performance of the participating policies.

The benefit of a participating policy is that it not only provides guaranteed protection but also gives returns in the form of bonuses, which can contribute towards achieving your children’s goals.

You can decide how you wish the bonus to be paid. It can be paid out on each policy anniversary with varied options for utilization. You can choose to receive the bonus as a payout, offering an immediate source of income to take care of any expenses related to your child’s growth in that year or to meet your other financial commitments.

Alternatively, if your goal is long-term wealth accumulation, you can allow these bonuses to accumulate within your policy, supporting your financial goals over time.

Furthermore, you have the flexibility to use this bonus to offset or pay your policy premiums, thereby reducing your overall financial commitments.

Als