Decoding Insurance

Get greater flexibility and better returns by investing in these plans

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There are plenty of risk-averse investors in the Indian market. The majority of them invest for two reasons - one, to generate greater returns, and the other, to put the invested money to little or no risk. People usually look for strong long-term investing options to avoid short-term market fluctuations. Moreover, the drop in the FD interest rates over the last few years has undoubtedly changed the direction of many people's financial planning. This is especially true for a sizable portion of India's middle-class households, for whom FDs have long been a popular investment option. 

Thus, considering the current market situation, guaranteed return plans are an excellent investment option for you. These plans are popular because of their risk-agnostic nature, which attracts  risk-averse investors. Not only that, but they also provide greater tax-free returns than FDs. Further, as the number of Omicron cases rises, the possibility of a third COVID wave seems more likely. In the midst of such uncertainty, most investors would prefer to invest in a product that not only provides strong returns while offering minimal risk, but also provides life insurance. Guaranteed return plans combine all of these factors in just the correct manner. Furthermore, there are several types of plans available in the market that provide even more benefits. Let's have a look at what they have to offer.

Increased benefits and flexibility

Although guaranteed return plans are best known for offering investors to lock in their interest rate for up to 45 years, there are other options available. For instance, under Tata AIA's Fortune Guarantee Plus, you can receive an income for 45 years beginning in the sixth year at a return rate of 5.74 % that is tax-free due to the life insurance component. You earn a higher rate of return than a taxable 5% return on FD. However, if you want to surrender your policy, you can do so within the first five years and receive the original invested amount. There will be no surrender fees, and you will receive your investment amount instantly. Additionally, if you surrender your policy within the income period, you will be paid at a discounted rate of 7.5 percent. However, because you will also generate income throughout this time, this is still a good deal.

 This plan provides the investor with a high level of flexibility and benefit because most guaranteed return plans have a surrender value of 30% -40% after the first three years. So, if you invest Rs 1 lakh and want to cash out after three years, you will only receive Rs 30,000. 

Greater, tax-free returns

As stated previously, FDs have seen a consistent reduction in interest rates, reaching a seven-year low. As India continues to be a developing economy, the return rates on FD have fallen from around 8% to 5% over the past few years.  Further, in the recent monetary policy statement, the RBI had projected retail inflation at 5.3 percent. As a result, your money will generate a negative interest rate of -0.3 percent in this situation. When you include in the taxes, the returns drop even further. If you choose a guaranteed return plan, you will not only get better returns, but you will also get tax-free returns.

Financial safety with guaranteed returns and no risk

These products, as the name implies, provide a guaranteed return on investment and are risk-free. Apart from providing a better return and preserving your original investment, they are also an excellent gateway for reinvestment. While banks enable you to invest in FDs for a period of 10 years, you can invest in these plans for a period of 45 years. This allows you to effortlessly manage your key milestones.

You can also choose to invest in an income plan and receive recurrent income, or you can choose a lump sum benefit plan. For instance, HDFC's Sanchay Fixed Maturity Plan offers assured returns in the form of a lump-sum payout at a rate of return of roughly 5.5 percent. This also includes a life insurance policy and other insurance features. Most importantly, if you want to surrender the policy, you will still receive at least the amount you invested in it.

In these unpredictable times, insurance benefits are important

The first and second waves of COVID have taught us a lot about how to prepare effectively in advance. With the Omicron outbreak predicting a bleak future, it's necessary to be financially prepared for any unanticipated events. The insurance component is another advantage of the guaranteed return plan. These plans include a life insurance policy that pays out 10 times the annual premium to the policyholder's dependents in the event of the policyholder's untimely death. You can also add riders to your policy, such as critical illness or personal accident cover. As a result, these plans not only ensure your present, but also your future and the future of your dependents even in your absence.  

If you don't want to take risks yet want to grow your money, these guaranteed return plans are your best bet.


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