Investment Plans are financial products that provide the opportunity to create wealth for future. Life Insurance products are often used as investment instruments. The advantage of investing through a life insurance plan is that it not only allows you to create wealth for future but also offers comprehensive life coverage at the same time.
These plans are essentially of two types, Unit Linked Insurance Plans or ULIPs that provides returns based on market performance, and traditional endowment plans that offer a lump sum or annuity payout at the end of the policy term when the life insurance policy matures. These type of saving scheme or investments offer life coverage and returns but differ in their construct.
A good financial plan with returns and life coverage invest the premium as paid by the policyholder in the stock market and gives them returns which are comparatively volatile as they depend on the performance of the stock markets. Whereas, an endowment plan offers lower but safer returns. However, a customer does not get to know where they are saving money or it is being further used due to the opaque construct of endowment plans, unlike ULIPs where they know where their fund is being put. ULIPs offer customers the option to check the status of their investments through a figure called the Net Asset Value (NAV), among others.
Nonetheless, endowment plans have their benefits. Where ULIPs give the policyholder a lot more flexibility and transparency, endowment plans act as a guaranteed return plan option as they offer definite profits.
|Investment Plans||Plan Type||Entry Age||Maximum Maturity Age||Policy Term||Fund Options|
|HDFC Life Click2invest||ULIP||30 days – 65 years||75 years||5 – 20 years||8|
|SBI eWealth||ULIP||18 - 50 years||60 years||10 - 20 years||4|
|ICICI Pru Smart Life||ULIP||20-54 years||30-64 years||10 – 25 years||8|
|Bajaj Future Gain||ULIP||1 - 60 years||70 years||10 years (min)||7|
|Aegon iInvest||ULIP||7 - 55 years||70 years||10/ 15/ 20/ 25 years||5|
|Bharti AXA eFuture Invest||ULIP||18 – 59 years||69 years||10 years||6|
|SBI Life- Smart Scholar||Unit-linked child plan||18-57 years (for proposer) 0- 17 years (for child)||65 years||8-25 years minus child’s age at entry||7|
|Bajaj Allianz Fortune Gain||ULIP||1 – 63 years||70 years||7 - 30 years||7|
|Future Generali Easy Invest Online Plan||ULIP||0-50 years||18-70 year||10,20 years||5|
|HDFC SL YoungStar Super Premium||Unit-Linked child plan||18 – 55/65 years||65/75 years||10 – 20 years||4|
|Aviva iGrowth||Unit-Linked life Insurance plan||18- 50 years||60 years||10, 15, 20 years||3|
|Bajaj Allianz Retire Rich||Unit-Linked pension plan||30 - 73 years||80 years||7 - 30 years||3|
|Retire Rich||Unit-Linked pension plan||30-73 years||37-80 years||7-30 years||1|
Life Insurance Investments: The best investment plan offers the policyholder both life cover plus the added advantage of saving fund. Life insurance investments is always taken keeping a future objective in mind and this objective could be either a long-term or a short-term objective, like buying a house, child's marriage and education or just building up a corpus for future. The best investment acts as a two-in-one solution.
Unit Linked Investment Plans (ULIPs): Unit Linked Plans as commonly referred to are a type of coverage plan that provides coverage wherein the money paid as premium by the investor is channelised into the stock markets. Each and every ULIP has a different set of funds that they invest in. Individuals who invest in a best investment plan get a certain number of units of the fund. These investments are based on the correlation of the fund value of the fund they are investing in and the premium the investors have put in.
The Unit Linked Insurance Plans are amongst the best investment options in India in case you are looking for some coverage cum investment options. The ULIP plans give both financial security and life coverage. ULIPs also give you the leverage to make direct market investments. Your ULIPs funds can be invested into equity funds or debt funds or both partially. The value of the debt fund or the equity fund is evaluated as Net Asset Value the criteria. Though investment through ULIPs is rarely seen case but Unit Linked plans have a greatly responsible in the investment market.
Comparatively, mutual funds are complete Systematic Investment Products i.e. SIP. Different mutual funds have different risk exposures. Mutual funds that are equity oriented invest a major part into equities wherein the balanced funds or hybrid funds invest into equity and debt fund market. The debt funds invest in the bonds and fixed income securities. Below is a brief on how ULIPs and Mutual Funds justify your investment needs:
The potential returns on ULIPs are lower since the ULIPs fall is a member of low risk products unlike a mutual fund product. The sum assured promised by the product is regardless of the return earned by the ULIP plan. Wherein mutual funds are differently featured as the equity mutual funds incur better returns than the hybrid returns and the hybrid funds give higher returns than the debt funds.
ULIPs can be anytime used for money withdrawal to get through any financial emergency. This totally depends on the investment tenure of the product. Although mutual funds are more liquid as the market exposure is higher than ULIPs.
Since ULIP plans are less prone to risks because the simple ideas of ULIPs are to provide coverage. Although ULIP plans have a variety of scope to invest its funds the ULIPs needs to be handled diligently since they are basically insurance products. The risk associated with equity mutual funds are more than hybrid mutual funds and both are relatively more risky than a debt fund. Although an investor can put in their money after making a detailed study on the product NAV i.e. the Net Asset Value.
Endowment Plans: Endowment plans are the traditional form of insurance products that offer an individual a life cover with very low profit. Endowment plans are usually taken by individuals who are looking to increase the value of fund plan but one which offers them guaranteed profits in lieu of a higher life cover.
Endowment plans are the best investment plan for investors who are not looking for a large corpus but are actually more concerned about keeping their funds safe and secure, and still receive a certain amount of profits on their assets.
Guaranteed Return Plan: These plans offer a guaranteed amount of fund to a policyholder at the end of a specific investment policy term. The policyholder needs to compare and know that the guarantee he gets here is specific to set of terms and conditions of the plan. These conditions could be either a:
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The best investment plans or savings schemes offer more than one benefit to the consumers. Primarily, they offer:
Protection to loved ones: Return on investments with coverage provides the dual benefit of life cover and returns. This means that in the event of anything unfortunate happening to the insured, their family will receive the sum for which they were insured in addition to the fund value either as a single or in the form of monthly/quarterly/half yearly payments. They help to secure the family needs and monetary goals if the insured party is unable to earn a living or in the unfortunate event of his demise.
Goal based planning: A goal based saving option is a great way for saving money for a goal – whether it is buying a house or a car, paying for children’s education costs, or planning for marriage or after you retire. The endowment funds offer a secure yet safe way to plan for retirement if you are not keen on riskier market linked ULIP plans. The ULIP plans offer alternative opportunities to invest and you can take a look at their historical profits to calculate your returns and corpus build up in a few years time. Also, the lock-in period of a good plan to invest and save that the funds stay untouched and builds up over the years to help you achieve your objectives.
Build fund reservoir: Plans with coverage cum investments with lock in period help to save money that can be used to fulfill a financial goal. Whether you want to buy your first house in seven years and/or save enough to buy a second home in the next five, your saving plan feature can help accomplish your aims.
Tax Benefits: The premiums paid under these plans qualify for deduction under section 80C of Tax Act up to applicable limits. This means that you are not taxed on the funds you invest in these options or best saving schemes and additionally the profit is reduced by the investing fund. The exemption, however, is limited to the total exemption limit under section 80C and cannot exceed that statutory limit. In addition, the payout received on maturity is exempted from levies under section 10(10D) of the Act.
Options to obtain a loan in lieu of the same as a guarantee against non-payment: Banking institutions take these plans as collateral for any loans given to the insured. These instruments act as security for the loan. Since the loan is in the form of a secured loan, the interest rate is generally lower and other terms and conditions more favorable as compared to unsecured loans.
To understand how much cover a person needs in a best saving scheme, he or she has to take stock of their existing expenses, compute to the extent possible the amount of future obligations that are likely to crop up and how much money they need to meet their living expenses. A key factor is also the age of dependents as this would determine how long before they can meet their own living expenses without having to depend on the payouts from the schemes.
There are different options to invest and not necessarily all of them can fulfill the basic objective of an investor to invest. To know more about this, it is always good to compare before you can purchase. When we are comparing we need to look at a few things:
The planning for children can be further sub-divided into two: the first for the children’s education and the second for their marriage. Both education and marriage are major expenses and need proper asset planning. Insurance investment options are ideal for these as they provide the child the necessary covers in addition to helping the parent prepare for the eventual expenses.
The ideal move for retirement is to begin at a young age, this can help build up a considerable corpus by the time the investor/insured person retires. A good retirement option is one that provides a lump sum payout at the retirement age or just before, to meet the relocation expenses from the place where the person is working to his hometown, and regular payments thereafter that serve as monthly earnings for the individual. The insurance providers offer a range of annuity or periodic payout options that the persons can choose from based on their needs. The schemes chosen should depend on the age of the insured person.
Though equity-linked ULIPs offer the best returns, they are not ideal for people above a certain age due to their higher risk profile. People in their 20s or early 30s can opt for an option to invest with a focus on the equities but those in their 40s or 50s should gradually move away from equities and stick to conservative debt funds. An early move helps to build a significant corpus by the time the person retires. The best strategy is to begin early, have a stock market oriented investment in the 20s and early 30s and gradually move towards a debt-focused portfolio with age.
Some insurance providers provide the option to do this automatically with the person’s full awareness while others provide the insured individual to manage the allocation themselves through the plan. Most providers do not allow individuals beyond a certain age to opt for aggressive funds for the investing scheme and instead gives them a perfect blend of growth and capital preservation. Most retirement schemes offer the insured the option to make a single premium payment each year or opt for regularised payments. The choice between the two should depend on the convenience of the insured person, his ability to pay, and the discount provided in the lump sum amount. Insurance providers offer the option to change the periodicity of the premiums depending on the insured’s convenience. They also offer additional options to increase the policy amount, change the fund mix or increase the cover through top-ups or otherwise.
The investments can be classified according to the type of schemes they provide, the duration in which the premium needs to be paid and the life stage of the investor/ insured person.
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