Best Investment Options in Insurance
Savings Plan Options 1: Endowment Plans
Endowment plans are regular saving plans which help build a corpus and give guaranteed maturity benefits along with bonuses. The product is a best saving plan in India as they give returns that are equivalent to a fixed yield or deposit. In addition, they also combine insurance risk cover with add-on riders to primarily build a safety cushion in case something goes wrong. They are clearly among the best investment options available to people looking for an insurance cover as well as investment and saving schemes in India.
An endowment policy covers risk for a specified period at the end of which the insured receives the sum assured plus all accrued bonuses. They are considerably highly expensive (considering the annual premium payment) as compared to a term or whole life plan. If the policyholder dies during the policy term, then a payout of the sum insured along with bonus is issued immediately to the beneficiary.
There are two types of endowment plans, with each having its own advantages.
WithoutProfit Endowment Plans: Withoutprofit endowment plans have no participation in the annual profits of the insurance company. Despite the sum assured,one can possibly get the loyalty bonus as a single payout made if you stick to the insurer. These are the best investment options for investors looking for a low premium saving plan that offers safer returns.
WithProfit Endowment Plans: These plans share profits an insurance company makes each year with the policyholder. They offer more returns than withoutprofit endowment plans. However, they are expensive as their premium is higher than withoutprofit endowment plans. These policies are investment options for people who are looking for increased but safer returns.
Assured returns insurance plan, also called guaranteed additions in insurance parlance, is when one knows the return or profit at the beginning. If the assurance of return is non-guaranteed, it is called a bonus.
The endowment plans have two types of bonuses, making them one of the best tax saving investment options
Reversionary Bonus: Also called a regular bonus, this is an annual bonus which depends on the performance of the insurer and is added to the fund every year, payable at the end of policy period of these best investment options. Most insurance companies ensure that they accrue regularly and serve for the investors looking for safer returns.
Terminal Bonus: A terminal bonus is an additional loyalty bonus offered by the insurer at the end of the policy term. These sums increase depending on the term of the plan and the insurance amount. The terminal bonus swings the vote in favour of endowment plans as investment options for the conservative investor.
Endowment plans are best suited for someone who is looking for additional benefits along with a life cover. They are among the best investment options and offer multiple insurance plans to meet double endowment policy, education endowment policy, marriage endowment policy an individuals distinctive needs, viz. education endowment policy,full endowment,double endowment policy, unit linked endowment, marriage endowment policy, and low cost endowment.
Benefits of Endowment Plans
Endowment plans provide dual benefit of investment and insurance making them one of the best investment plans in India
They offer long term investment and allow one to receive a lump sum amount after some years or at the time of maturity, making them one of the tax savings investment.
They are ideal if one wants to pay premium for a short period and wants to enjoy benefits from the plan over the policy term
Endowment plans are a good tax savings option as they are tax free. Section 80C of the Income Tax Act allows tax benefit on the annual premium and section 10(10D) makes maturity claims completely tax-free.
Policyholders also have the option to add accidental riders to further enhance the cover by paying a marginal premium. People can use an investment calculator in India to find the benefits
Endowment policies are amongst the best investment options as they are liquid in nature
If for some reason, one ceases to pay premium after a set minimum number of years, then a free paid-up policy may be secured with reduced sum assured, subject to certain conditions
In case the policyholder survives the policy term, sum assured amount and additional bonuses accumulated during the term are also paid further highlighting the benefits of endowment plans
In case the policyholder dies during the policy term, the death benefits are paid to the nominees which include full sum assured amount and additional vested bonus
Savings Plan Options 2: Money Back Plans
Money back life insurance policies are popular as they offer dual benefit of insurance and redemption of money at regular intervals. A best saving plan is a type of endowment plan which gives periodic cash payouts to investors over the policy term. As they help build regular large capsules of funds, they are useful for the salaried class who wish to save money to buy large assets every 3-5 years. These plans are meant for individuals who require money at certain intervals in their lifetime to meet fixed short-term and long-term financial requirements such as buying a car or house.
A portion of the sum assured is paid out at regular intervals in a money back policy. If the policyholder survives the term, he gets the balance sum assured in the best saving plan. In case of death over the policy term, the beneficiary gets the full sum assured irrespective of the payouts already made. The bonus is also calculated on the full sum assured and not the balance money left. Because of these two reasons, premiums on money back plans are higher than endowment plans.
Benefits of Money Back Plans That Make Them tax saving investment Options
Protected Savings: The savings in this plan remains safe as the premiums paid are not linked to the capital markets which offer uncertain returns. The returns in such money saving plans are guaranteed.
Liquidity: A money saving plan like a money back plan is a great way to meet intermittent liquidity requirements at important stages in life. Since the payout intervals are fixed, a money saving plan helps in the careful planning of crucial requirements at important milestones in life.
Life Insurance: Finally, a money saving plan offers life insurance cover. In the eventuality of the insured person passing away, their legal nominees get the full sum assured amount.
SavingsPlan Options 3: Unit Linked Insurance Plans (ULIPs)
A ULIP is a type of life insurance product, which combines the safety of insurance protection with wealth creation opportunities. A part of the investment goes towards providing life cover and the residual portion is invested in a fund which invests in stocks or bonds. ULIPs are the easiest and best investment plans in India for a person to enter the stock market with an added advantage of life cover. As these products provide tax benefits and market linked returns, they are one of the investment options for the long-term.
ULIPs offer many investment funds to choose from which allow the flexibility to shift between equity and debt, based on the market conditions and ones risk profile. ULIPs are structured in such a way that the protection and the savings elements are easily distinguishable, and hence, can be managed according to ones specific needs. This way, ULIPs offer unprecedented flexibility and transparency.
Types of ULIPs That Serve as Good Investment Options
One of the biggest advantages of a ULIP is that it serves a variety of financial objectives and acts as a best saving plan for all investors. There are different ULIPs for just about everyone. Depending on ones life-stage and corresponding goals, there is sure to be a ULIP that can help provide the best investment options for the individual.
Why ULIPs for Retirement Planning are Best Investment Options
Retirement is the end of active employment and therefore, regular income. With disciplined savings in a pension plan, one is able to amass enough funds to provide a steady income post-retirement. Plus the fact that they are a tax saving investment is an added plus.
One can either make a lump sum payment or regular yearly contribution during earning years in the tax savings pension plan. The money in a best saving plan is then invested in funds of ones choice. In retirement plans, the earlier one begins the greater one gains post-retirement because of the power of compounding.
One can choose to receive annuity any time after the vesting age (the age at which one becomes eligible for pension decided at the beginning) in a best saving plan. Most unit-linked tax saving investment pension plans come with a wide range of annuity options which let one structure post-retirement benefits payouts.
Why ULIPs for Long-term Wealth Creation are Best Investment Options
ULIPs are a good option if one is looking for long term wealth creation along with an insurance cover. Young people in their 20s and early 30s invest in such plans as it allows them to use the funds for long-term financial goals like purchasing a house, paying for their child’s higher education, etc.
Best investment options such as ULIPs for wealth creation can be classified as:
Single Premium – Regular Premium Plans: Depending on ones needs and premium paying capacity, one can either go in for a plan where one has to pay a lump sum premium once during the policy tenure, also known as single premium plans. Or go in for regular premium plans from a best saving plan where one has to pay periodic premium where the frequency is determined as per ones convenience. This makes these plans one of the best investment options. Use an investment calculator in India to find what you need.
Guarantee Plans – Non-Guarantee Plan: Some wealth creation ULIPs offer guaranteed benefit and are thus one of best investment options. These are ideal for people who want to enjoy potentially higher returns without taking any market risk. Non-guarantee plans come with a choice of fund options ranging from aggressive funds (invest in equities with the objective of capital appreciation) to conservative funds (invest in cash, money market instruments and / or bank deposits with the aim of capital preservation). These let the policyholder decide where to invest their money as per their investment preferences and saving plan needs, including the time frame they are looking to get returns.
Life Stage Based – Non-Life Stage Based: As the name suggests, life stage based ULIPs take into account ones priorities at different stages in life and accordingly distribute the money across equity and debt. It ensures that the asset allocation is in sync with ones age and changing financial needs, making them one of the best investment options. On the other hand, non-life stage based do not take into account the age when investing money.
Why ULIPs for Childs Education are Best Investment Options
Child Plans are saving instruments which help parents build a protected asset for their child’s future. They also provide many insurance features which protect the intent or reason for corpus building; primarily for child’s future education and expenses.
Education today is more important than ever and the good education is expensive. The main responsibility of parents is to ensure that their child gets the best education possible. ULIPs designed especially for childrens education ensure that sufficient money is available at key milestones ensuring that the child’s education is not hampered even if something unfortunate happens to the parent (policyholder). Child education plans are the best investment options safeguard the child against the financial ramifications of the death of a parent.
ULIP Child plans also offer the following features that make them one of the best tax saving investment plans:
Flexibility of including riders, such as income benefit rider, disability rider and more for extra benefits. These ensure that the child will get a fixed amount of money annually to meet his/her educational expenses, making them one of the best investment options.
In case of death of a parent, the child will not only immediately receive the sum assured but will also continue to receive money at the key educational milestones. This makes them one of the best investment plans in India for children
Why ULIPs for Health Solutionsare Tax Saving Investment Options
Healthcare costs are increasing at an alarming rate. Illnesses sometimes force families to borrow and sell assets to meet expenses turning medical emergencies into financial emergencies. This is why the insurance industry has come up with a novel innovation recently called the Health ULIP. Health ULIP is the best savings plan, designed for investing a portion of the premium to building a health fund to meet the future health-related expenses by investing in a long-term flexible savings plan with multiple fund options. A health fund allows one to claim health related expenses and also fund future health insurance charges. It has the benefit of tax exemption on premium paid under section 80D of the Income Tax Act.
Advantages of Unit Linked Plans
Market Linked Returns: Unit linked plans offer the opportunity to earn market-linked returns as part of the premiums is invested in market linked funds which invest in different market instruments – debt and equity in varying proportions depending on ones risk appetite. If the market does well, one can earn good returns. This makes ULIPs amongst the best investment plans in India. Use an investment calculator India to check which of the tax saving investment options make sense for you.
Life Protection, Investment and Savings: Unit linked plans offer the twin benefit of life insurance and savings at market-linked returns, making them one of the best investment options. ULIPs offer protection and also give the opportunity to invest money to earn high returns. It helps one instil the habit of saving and investing, important for building wealth over a period of time.
Flexibility: They offer significant scope for flexibility with options like:
Switching between investment funds with different risks as per changing needs
Facility to withdraw partially from ones fund (this is subject to certain charges and conditions)
Single premium additions enabling the policyholder to invest additional sums of money over and above the regular premium, subject to certain conditions.