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Life Insurance 948 views January 6, 2020
Investments, in finance, as we know, are allocations of money with expected future benefits in the form of returns on the investment made. Investments are of most importance because they help build a financial corpus. The concept of building a corpus is no secret because money is that one resource which is required at all stages of life to sustain. Furthermore, these investments are beneficial in the future: from covering a child’s education and marriage to accumulating monetary resources for after retirement. Therefore, finding out different types and ways of investment can help build one’s investment strategy as per their requirements.
There are more than sufficient options and avenues to find your tailor-made investment plans to build your funds. However, all the available avenues complicate the choosing procedure; in this article, you will learn about one such avenue- Investment Plans-and how to make use of this simple investment option to grow your funds.
Table of Contents
First and foremost, let us understand briefly what an investment plan is, its types, its features and its benefits. Then we will learn about some of the best investment plans offered in the market; additionally, some objectives to keep in mind before investing in one such plan, documents necessary and other eligibility criteria.
Investment Plans are among the easiest ways to invest hassle-free and accumulate a solid financial base over time. This is because varied plans offered by life insurance companies act as investment instruments that can be benefitted from upon investment. The most advantageous aspect of investing in such simple plans is that it not just aids the accumulation of wealth but also provides comprehensive life coverage simultaneously.
1. Endowment Plan:
2. Money-Back Plan/Guaranteed Return Policy:
The features to observe are clearly mentioned below:
The benefits of investing in a plan are:
1. Accumulation of wealth
In case you want to accumulate wealth over the period, investing in life insurances is a sure-shot way. These plans cover for various expenses throughout one’s lifetime such as a child’s education and marriage, an individual’s retirement and pension etc.
2. Financial Security
The major benefit of investing in life insurance policies as an investment option is that it not only provides the opportunity to accumulate wealth over time but also provides life coverage. Other benefits like Survival benefit and death benefit are offered along with it. In the long term it will pool enough funds to provide financial security to just an individual but also their family.
3. Retirement Security
As mentioned, different aspects of life and expenses attached can be met with if such investments are opted for. This also includes Retirement security, especially financial security. An individual can deliberately create a corpus for retirement too; the accumulated funds can then be used for later stages of life.
4. Coverage for Death Risk
Most investment options do not offer to cover for death risks and therefore, it makes this investment plan a choice better than many others. It was of great importance to be able to provide and take care of the needs of family members even in your absence. That’s precisely what death coverage offers. The sum insured is given to the nominee or the benefactor in the event of death.
5. Tax Benefits and Savings
Another major benefit apart from risk coverage or funds accumulation is that these investments help save in income taxes. Under section 80C and 10(D) of the Indian Tax Act the premiums payable etc. will be exempted from tax.
Investing in Life insurances has basic dual benefits; that is the flexibility to invest money for returns and be insured for the duration. This feasible investment option—investing in life insurances—provides the benefit of two in just one plan.
7. Facilitates Loan proposal
Lastly, life insurances as an investment tool also help in acquiring a loan. This is because a life insurance compensates for security or collateral while obtaining a loan. But this will depend on the coverage of the plan, the premium payable, and the type of loan, its eligibility criteria and the loan amount.
Here are some of the best monthly investment plans or annual investment plans in the market that offers high returns. Some of the best investment plans for 1 year, for 3 years and for 5 years and above are as follows:
Other plans with policy terms of 10 years and above are SBI eWealth, ICICI Pru Smart Life, Bajaj Future Gain, Aegon Invest, Bharati AXA eFuture Invest, Future Generali Easy Invest Online Plan, and Aviva iGrowth.
In today’s world, investments have become quick and convenient. The credits lie with the development of online modes of buying, selling and investing. Furthermore, the presence of almost all investment companies online offers a multitude of choice at one’s fingertip. The scope for profits to has increased considerably; therefore choosing the right policy after comparing them as per your requirement.
The pointers provided below are for the benefit of the investors to help decide their near-to ideal plan. These pointers are to be kept in mind before investing in one such investment plan.
1. A number of people:
The number of dependent people in a family influences the coverage size of the policy and the relevant investment to be made. Therefore, keeping in mind the needs and the amount necessary to be financially secured has to be considered.
a). Ongoing incurred and other expenses:-
Depending on your lifestyle and the ongoing cash flow of income and expenses, choose an appropriate plan to be able to accommodate future needs without having to compromise on the present expenses.
b). Future Expenses:-
Though predicting future expenses are required to choose a policy in the first place, it is difficult to actually accomplish it. The rising needs and expenses, as well as inflationary effects, make it hard. It is always ideal to choose a policy that provides a higher sum than estimated.
c). Other major expenses:-
Any other major expenses like education and marriage plans for yourself or your children, other relevant requirements and that will incur expenses should also be considered while investing.
3. Coverage provided and the sum insured
Inclusive to the number of dependents, looking for a policy that covers all their basic requirements and needs irrespective of life’s uncertainties should be taken care of. An investment plan that targets an insured sum sufficient to do so will be necessary. If required the cover of a policy can be increased as specified by the provider.
4. The required goals
The first actual pointer to consider is the motive and the financial objectives you have. Clarity on a different aspect of investment like long-term or short-term, high/medium/low-risk plans, assured returns or not etc. have to be thought of. This will help have a defined goal and will help grow your corpus effectively and steadily.
5. Budgeting and planning funds
While planning on the funds, budgeting is important. Like including any debts or prevailing loan, and EMIs etc. This is to ensure your ability to repay back timely as these will be held against you while procuring a plan.
6. Insurance factors
a). Alternate Income Provision:
Having a stable income source should be considered a must for investment; this is to ensure that you are financially safeguarded during untoward happenings. These also include factors like disabilities and death by accidents, as well as retirements etc. that might lead to such situations. You should opt for a policy that is stable and supportive.
b). Another source of regular income:
These are basically investments made to cover for family members and other dependents.
c). Premiums payable:
The premium payable plays a huge role in planning, purchasing and securing a policy. Choosing one wisely as per requirement and coverage provided is a must. Calculate premiums to compare and contrast for different policies before deciding on one. Ideally, start with a premium that’s affordable and then increases as you go, if required.
d). Coverage Provided:
The coverage provided is the crux of the matter. With each shortlisted policy thorough research must be done before opting for your final plan. The coverage should be as such- covers for your unique investment needs and requirements.
e). Available Riders:
Riders are simply the add-ons that are obtained over a basic policy to enhance the coverage offered by the primary policy. As the coverage provided might not necessarily cover for every important requirement. Know the features and extended coverage provided by the add-on before choosing it.
f). Payout Types:
The payout mode is an important aspect to consider too. Some offer regular pay-outs whereas others as and when required. The type of payout that suits you the best for investment purposes has to be chosen.
g). Increase on the decrease in premium:
As recommended, opting for a plan with lower cover and gradually increasing with a rising income can be done.
7. Expected Returns and more:
The end result of any investment is the returns they offer, therefore, it is of utmost importance to choose one that provides a good and expected return. Expected returns though depend on one’s appetite for risks—the more the risk, the higher can the scope of return get. Equity mutual funds are an example of such an investment. Irrespective of high-risk plans or balanced plans, selecting a plan that generates a healthy return best suited to your needs is the way to go.
To start investing in various plans these are the common eligibility factors that an individual has to meet up to:
The documents required to purchase investment plan is as follows and will have to be submitted at the time of purchase compulsorily:
Investment plans are not just a convenient way to accumulate desired wealth but are also a comprehensive instrument to blend the flexibility of investments with coverage. ULIPs (Unit-Linked Insurance Plans) are among some of the most accessed plan types which divide a portion of the premium paid for sum insured and the other to invest in the market. Many such plans are available in the market; some are monthly and some are annual; for example HDFC monthly investment plan and such. Choose your plan type and investment wisely depending on the returns, the coverage etc. i.e., after assessing the parameters mentioned above.
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