Is Capital Guarantee Plan a Right Investment Product in Times of Coronavirus Pandemic?

The entire world is experiencing hardship and uncertainty due to the unprecedented COVID-19 pandemic. Currently, the whole country is amidst the biggest economic crisis of the century. The high market volatility is likely to continue until the COVID-19 reaches a manageable level. Due to the high volatility of the market, people are looking for a safe investment option that offers a guaranteed return.

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We are rated^~

7.7 Crore

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4.2 Crore

Policies Sold

Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

But does this mean that you should not invest in the market now? Or, you are confused to invest in the right investment product. To help you out, here we have discussed in detail the right investment products, which you might consider investing in times of COVID-19.

Look For The Most Preferred Options

Nowadays, due to the high volatility of the market, most people want to invest in investment options that offer a guaranteed return on investment and are a safe investment product. One of the most popular guaranteed return safe investment products is bank fixed deposits. However, bank FDs come with its own set of disadvantages. First, it comes with a maximum lock-in period of 10 years. Second, the interest rate of bank FDs has fallen drastically in the last 6 years. The interest rate of bank FD has fallen from 8.5% p.a in the year 2014 to 5.4% p.a. in 2020, which is the lowest interest rate of all time.

Also, the returns on bank FD deposits do not gain any tax benefit. Thus, during times like this, you must try to opt for a product, which not only offers a guaranteed return but also provide a high-interest rate on the invested amount along with the benefit of tax saving. Based on the recent market scenario, one such investment product that offers the best returns is capital guarantee plans.

Capital Guarantee Plans

To protect investors from experiencing losses in the current market scenario, Policybazaar has introduced an innovative solution known as capital guarantee plans (CGP). The capital guarantee solution plan is a combination of the Unit Linked Insurance Plan (ULIP) and the guaranteed return plan. Under this plan, a part of the invested amount goes into ULIPs, whereas the rest 50-60% of the amount is invested in guaranteed return plans. In case the policy tenure comes to an end, you can avail of the maturity benefit based on the market linked returns from the ULIP funds along with the returns generated on the traditional guarantee plan.

Not only this, what makes the CGP one of the most lucrative investment options during this time is that the premium paid throughout the policy tenure is 100% guaranteed. This means that on completion of the policy tenure, the policyholder is guaranteed to get back all the premiums he paid throughout the policy term.

For example- If you invest Rs.10,000 per month in a capital guarantee plan for a policy tenure of 15 years and premium payment tenure of 10 years, then Rs.4000 of the premium amount will be invested in ULIP funds, and the rest Rs.6.000 will be invested in the traditional product. After the completion of the policy tenure, you will receive a guaranteed return of Rs. 12lakh.

Helps to Plan for a Long Term Horizon

In the capital guarantee solution plan, you can choose a policy tenure between the range of a minimum of 10 years to a maximum of 40 years. The premium payment tenure varies between 12,10,7 & 5 years. The plan is a great investment option for investors who want to accumulate funds in the long-term or want to create a retirement fund. It comes with a retirement variant option, which is a combination of guaranteed return fixed income product and whole life ULIP. Suppose you invest Rs.5000 per month in CGP for the tenure of 10-15 years till you retire, after your retirement, you will receive a guaranteed 100% investment return and a monthly pension until you are alive. The annuity received and the guaranteed return is tax-free.

Why It is Important to Invest During COVID-19?

The historic data suggests that the market crashes due to pandemic are followed by big-bull runs. During the outbreak of SARS in the year 2003 between January to March, the Sensex was down by 11% and it hiked up to nearly 80% after a year. In January, this year the Sensex was at 41,945 points and due to the COVID-19 pandemic, it crashed to 25,981 points in March. The Sensex has now recovered to 38,369 points. Based on this observation it is a good time to restart or even start investing.

Wrapping it Up!

Keeping the current scenario in mind it may not be a good idea to invest in the pure market-linked product as you may not get a profitable return if the market goes down. Thus, if you have a low-risk appetite, the capital guarantee solution plan can be a great option of investment for you as it offers a 100% guarantee on premium along with the benefit of investment return.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).