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At various life stages, one need funds. An individual need to build the corpus. Whether the need is for child's education, marriage or retirement savings. When one starts looking up for various ways to build funds, one tends to look investment plans where your money grows while you sit back. Because of the number of investment avenues, there is no simple solution to it. However, the simplicity of investment plans offered by the most life insurance companies is one of finest options available.
What is an Investment Plan?
Investment plan is the simplest ways to build wealth over the time. Life insurance companies offer various investment plan options. These are the wealth creation products for the future when you will require it. It requires planning and understanding of different options available.
Life is unpredictable. If you are not prepared for an emergency, you may end up being numb or face financial crisis. And who wishes to be financially off their feet?
If you don't wish to be in such a position then the ideal way is to stay prepared.
Which means you need to start building your contingency funds by doing financial planning.
There are many investment avenues through which one can build a corpus for long-term goals and in case of emergencies.
Any investment tool will help you to achieve these goals and could be your rescuer. However, not all the financial vehicles would provide funds in case the life assured dies unexpectedly. In this case, the family would be facing financial crisis.
It is advisable to ensure your family is financially secured even in case of your absence. To do so, investment plans that also provide insurance to the life assured is a good way.
Investment plans under life insurance help you to build corpus while you live your happy moments with your family without worrying about tomorrow.
Investment plans are the building blocks of your worry-free life.
You should buy an investment plan because:
They provide you and your family a financial protection, safety net, and act as a financial aid in case of an emergency.
You have an opportunity of accumulating wealth over a period without doing much from your side.
You get tax exemption under Section 80C and 10(10D).
Cases where you would need financial aid:
Let’s see in detail how investment plans will support you financially:
Build Corpus: In case of any financial emergency, you need funds to stabilize or improve your unexpected losses. In such situations, the partial withdrawal, regular payout or full pay out on the maturity of investment plan helps you to be back on your feet.
Investment for the Betterment of your Child’s Future: Who doesn’t wish to invest for their child’s better future and to develop enough funds for their education? But, the fact is, with the rising inflation, providing a good education to your child is difficult without any financial support. The minimum interest rate on education loan is 11% per annum. If today, getting MBA costs Rs.5 lakh, imagine the cost after 10 years! It would be shooting above the roof. And it would dig a big hole in your pocket.But with a child plan, you could build funds for your child’s education. Such investment plans help you in your child’s education.
Plan Your Retirement: Many people think and dream of being financially independent on retirement. But people who invest and work towards that financial goal can actually see it coming true. With life insurance, you can start your retirement planning. It is advisable to start building up a corpus for your retirement once you have managed to meet your other financial goals. Moreover, the early you start, the better are the chances of retiring happily and financially free. These are few basic goals of investment plans. Fundamentally, you should look to accumulate and meet such life goals. Life insurance plans offer an opportunity to plan strategically and meet financial goals without any hassle. And also, provide life cover to the life assured.
Investment plans with life insurance are sure shot way to accumulate wealth over a period. As an investor one can choose suits the best depending on the risk, returns and disposal amount to buy a plan. In future, when you would require funds for child’s education, child’s marriage, retirement, pension, etc. life insurance investment plans will financially aid you.
Life insurance policy provides life coverage with investment options, which takes care of the family financially as both Survival and Death Benefits are provided. At maturity, policyholder receives the returns with profit in the pocket. This way one can provide long-term financial security to the family. In case of an unfortunate eventuality, policyholder dies before maturity period, the insurance company will pay the nominee the sum assured. In this way, it provides financial protection to the family of the policyholder.
Not all investment avenues offer death risk coverage options. However, investment plans by life insurance do. These plans include death risk coverage. This way, your family’s financial needs are taken care even in your absence. The sum assured is paid to the nominee in the event of the death of the policyholder.
One can buy these investment plans at any given time of life stage. That said, this allows you create the corpus for the retirement. One can buy and build funds that can be used at the later stage of life. In this way, even after retirement the investor will financially independent.
Flexibility of money to be invested and the duration. One can opt as feasible, depending on the needs and planning.
Investment plans are not only risk cover or wealth accumulation plans, but these plans also help in tax savings. As per section 80C and 10(10D) of Indian Tax Act, premiums and payout are exempted from tax. A perfect combination of savings, wealth creation, financial protection with tax benefits.
Life insurance investment plans also act as a loan facilitator. But, it depends on the coverage one has taken, premiums paid, eligibility for the loan amount, etc.
Unit Linked Insurance Plan (ULIP), is a combination of insurance and investment. In ULIP, a part of the premiums is deducted as insurance, and the other part of the premium is invested in market. Funds can be invested in bonds, equity, debts, market funds, or hybrid, depending on the investor. It offers transparency about the investment of your funds which you can evaluate and track as Net Asset Value (NAV). ULIP offers both coverage and investment options. As a Survival Benefit, you get the Maturity amount, depending on the prevailing prices of the units. As a Death Benefit, the nominee will receive the sum assured. Example: Investor pays premium of Rs. 30,000 for a policy tenure 30 years. The returns are indicative and related to the market.
|Investor||Policy Tenure||Annual Premium||Nominee Receives in 4% / 8% plan||Assumed Returns @ 4% / 8% p.a.|
|Age: 30 years (M)||30 years||Rs. 30,000||Rs. 4.94 Lakh/ Rs. 6.64 Lakh||Rs. 13.6 Lakh / Rs.27.3 Lakh|
Endowment plan is the traditional insurance product with an investment opportunity. It is a combination of coverage and investment. Funds are not linked to market. The premiums you pay throughout the period is divided into two parts:
Example: Investor pays premium of Rs. 30,000 for 12 years. The policy tenure is 17 years. The chosen sum assured is Rs. 5 Lakh. On maturity, policyholder will receive Rs.5.75 Lakh. If during policy tenure, investor passes away, nominee receives Rs.5.75 Lakh.
|Investor||Policy Tenure||Annual Premium||Nominee Receives||On Maturity|
|Age: 30 years (M)||17 years||Rs. 30,000 for 12 years||Rs. 5.75 Lakh||Rs. 5.75 Lakh|
Money Back plan is a type of investment plan by life insurance companies that combines investment and insurance. It offers death risk coverage and returns as a percentage of sum assured at equal intervals. Pay premiums for a pre-decided number of years, and receive payouts every year after the premium payment period ends. The policyholder receives money periodically. On maturity, the rest of the sum assured is paid back. The survival benefit also comes with terminal bonuses. In case if the investor passes away during the term, the coverage is paid to the nominee. Example: Investor pays premium of Rs. 35,000 for 23 years. The policy tenure is 28 years. The sum assured chosen is Rs. 4 Lakh. On maturity, policyholder will receive Rs.5.75 Lakh. If during policy tenure, investor passes away, nominee receives Rs.5.75 Lakh.
|Investor||Policy Tenure||Annual Premium||Periodic Returns||Nominee Receives in 4% / 8% plan||Assumed Returns @ 4% / 8% p.a.|
|Age: 30 years (M)||28 years||Rs. 25,000||Rs. 1.2 Lakh [on every 7th year (3 times during policy tenure)]||Rs. 4.3 Lakh/ Rs. 5.5 Lakh||Rs. 3 Lakh / Rs.5.85 Lakh|
An investor of life insurance investment plan can opt riders. Ass the investment plans also combines death risk coverage, optional riders under such policy is available. Riders expand the policy coverage. In addition to the basic sum assured, rider benefits are also paid.
Accidental Death Riders: If the policyholder dies the accidental death, the insurance company will pay the sum assured plus the rider benefit to the nominee.
Accidental & Total Permanent Disability Rider: If the policyholder suffers total permanent disability due to the accident, the insurance company gives the rider benefit to the life insured.
Critical Illness Rider: On diagnosis of any major critical illnesses such as heart attack, cancer, stroke, kidney failure, paralysis, coma, the insurance company pays the rider benefit.
Waiver of Premium: In case of a vanilla term insurance, if the life insured suffers any disability because of which is unable to pay any future premiums, the policy terminates.
Accelerated Death Benefit Rider: On diagnosis with a terminal illness, such as Cancer, Leukemia. AIDS, Ebola, the insurance company pays a part of the sum assured in advance and the rest to the nominee.
Mentioned below are the features you need to check before buying an investment plans:
Where are you investing: You need to know and be sure about where you are investing and how much risk is involved.
Look for complete transparency: Look for investment plans that are completely transparent.
Study past performance : The objective of investing is to gain returns. For which, you must check past performance report of the funds where your money will be invested in. This will help you to know how much returns can be expected. As per your investment funds, you can see their long-term or short-term performance report
How much are you charged: You may be charged a minimal amount as a commission to manage the portfolio. So you must check how much you are charged just to ensure you are not overcharged. And if yes, why!.
Know your fund house: How reputed or well-known is your fund house. As you put your trust in the fund house it is essential to know about their claim settlement ratio. . Plus, you are giving your hard-earned money into their hands to utilize on your behalf and to the best of their knowledge and experience, it is your responsibility to know your fund house.
The eligibility criteria to buy an investment plan are:
Mentioned below are the documents required for buying an investment plan:
|Insurance Company||Product Type||Product|
|HDFC Life||ULIP||HDFC Life Click2Invest ULIP|
|SBI Life||ULIP||SBI Life – eWealth Insurance|
|MAX Life||ULIP||MAX Life Fast Track Growth Fund|
|Bajaj Allianz||ULIP||Bajaj Allianz Future Gain|
|TATA AIG||ULIP||TATA AIG Life Invest Assure Flexi Supreme|
|HDFC Life||Endowment||HDFC Life Sampoorn Samridhi Plus|
|LIC India||Endowment||LIC New Endowment Plan|
|Kotak Life Insurance||Endowment||Kotak Premier Endowment Plan|
|AEGON Life||Endowment||AEGON Religare Premier Endowment Insurance|
|Bajaj Allianz||Endowment||Bajaj Allianz Save Assure – Endowment Policy|
|Bajaj Allianz||Money Back||Bajaj Allianz Cash Assure|
|LIC India||Money Back||LIC New Money Back Plan – 20 years|
|HDFC Life||Money Back||HDFC Life Super Income Plan|
|SBI Life||Money Back||SBI Life Smart Money Back Gold|
|Birla Sun Life Insurance||Money Back||BSLI Bachat Money Back Plan|
Almost all investment companies have an online presence. With so many options that promise you good returns, it becomes necessary to compare to choose the best. To invest in the best investment plan, you can compare investment plans online. With investment comparison tool available online, you can easily compare investment plans and their features. The comparison of different investment plans will get you quotes spontaneously. You can easily compare, differentiate, and choose the best investment plan that suits your requirement. It will save you money and time.
Is investing in Unit Linked Insurance Plan (ULIP) a good idea?
Unit Linked Insurance Plans (ULIP), provide life insurance cover and an opportunity to invest and build funds. Earlier, the charges were high, but post 2010, ULIP has changed, especially, when it comes to charges which means premiums are utilized in investing. Another aspect is, lock-in period has changed from 3 years to 5 years. ULIP offers an ample of opportunity to invest depending on the risk appetite of the investor. It gives an opportunity to invest in different products like equity, debt, bond or money market or hybrid. ULIP offers flexibility to change the premium payment terms, the sum assured and the choice of premium payment frequency. Moreover, you can enhance your plan with riders.
One thing you should keep in mind that you must invest in ULIP only with a long-term horizon, at least, keeping 10 years or more years of investment in mind.
What are the top investment plans with high returns?
The top investment plans to gain high returns are equities and large-cap mutual funds. However, it is advisable to consult your financial planner to help you in investing and balancing your investment portfolio.
What are the best short-term investment options in India?
There are many options to invest for a short term, like fixed deposits, savings accounts, equity-linked saving scheme (ELSS), recurring deposits (RD), money back plans, mutual funds, etc. If you are planning to invest for a period of 1 year then recurring deposit would be the best option. As in this plan, you pay money on a monthly basis and you also receive interest on the money invested. However, the interest is taxable. And if, you are planning to invest for more than a year, equity mutual funds and fixed maturity plans are most suitable, as these plans offer high returns and are more tax efficient when compared to other short-term investment options.
I want to secure my child’s future by investing in a best child investment plan. How do I go about it?
You can opt for different types of life insurance policies. You can opt for ULIP or Money Back plans or child plans to meet your child’s dream. Since all life insurance companies offer child plans with different variants under a plan, you can always opt for child plans to meet all your child’s educational goals.
Are there any good reasons to invest in a pension plan in my 40s?
Yes, there are plenty of good reasons to invest in retirement plans. If you haven’t planned your retirement yet, it is a good time to start now. It is always better to invest as soon as possible. If you have been doing your financial planning right so far, by now, you may be less burdened with loans and worries about your child’s education planning. It is said, “You can meet all your financial needs but retirement goals.” Because you can opt for loans or choose different financial tools to meet those goals. However, there is no facility to opt a loan for your retirement. It is essential to build a corpus on your own with the help of various financial vehicles. It depends on how you plan your retirement. However, pension plans are the safest and easiest ways to plan your retirement. Investing in pension plans in your 40s give you an ample amount of time before you retire. You would still have at least 20 years of time frame to build a corpus to enjoy your post-retirement time. Different investment plans you can look forward to your retirement planning when you are in your 40s are:
Things to keep in mind before you invest your money
Below mentioned points you should keep in mind before investing:
Why should you buy an investment plan?
You should buy an investment plan because:
What are the best investment options under section 80C?
Today, the market is loaded with different investment plans, one best than the other eligible for deductions under Section 80C. Let’s have a look at some of the best investment options that would make your life a little better by savings those extra bucks on tax deductions under Section 80C:
ELSS – Equity Linked Savings Scheme : The ELSS is nothing but mutual funds that are tax saving. They invest almost 65% of your assets in the stock markets. You can save tax under Section 80C if you invest in ELSS funds up to Rs.1.5 lakh. The lock-in period here is the lowest which is 3 years compared to other investment options under Section 80C. The drawback of the ELSS is that the returns offered are not guaranteed. You may get 12-15% returns from the best performing ones only over long term. These funds offer liquidity once the lock-in period is over.
EPF – Employee Provident Fund : You as an employee can also earn a tax break up to Rs.1.5 lakh in case you invest in an employee provident fund (EPF), under Section 80C. Here, your employer deducts almost 12% of your basic salary and invests in the EPF fund or any other recognized provident fund. You can earn a good interest rate of 8.8% in case you invest in EPF funds.
NPS - National Pension System : This scheme basically is an Indian Government organized pension scheme that helps the retired troop with a regular pension. NPS offers tax savings of up to Rs.1.5 lakh under Section 80C and Section 80 CCE. You can also claim an additional deduction of up to Rs 50,000 under Section 80CCD (1B), which is in addition to Rs 1.5 lakh permitted under Section 80C.You as an investor can choose or subscribe to any plan depending up on your risk profile. The highest capping is 50%. You may also change the pension fund manager. NPS comes with a major drawback that the maturity amount is taxable. Besides, it doesn’t offer guaranteed returns.
FD – Tax Saving Fixed Deposits : The Tax-Saving FDs come with a lock-in period of 5 years. You can also earn a tax break up to Rs.1.5 lakh in case you invest in Tax Savings FDs, under Section 80C. The interest rate of the tax saving FDs however vary from one bank to another ranging from 7 to 9%. The biggest advantage of these type of FDs is that they offer guaranteed returns with 100% capital protection.