It is important to save some portion of money earned for the better life in future. Now, the question is what is the best investment tool in the current scenario of ever increasing Inflation
and rupee losing its strength each day? As time goes on, the cost of living will shoot up drastically which if not planned well in advance will pose huge threat to the civilization. Along with the price rise, the other concern is rise in the life expectancy, as a person ages his requirements increase whereas the source of income reduces.
So, if you are not taking care of your finances right now then as they say “failing to plan, means planning to fail”. If you are overwhelmed with the plethora of investment schemes, it is safe to choose insurance as an investment tool, as it is one of the most popular investment alternative in India. The reason being that in addition to the investment insurance also safeguards your life. Insurance companies in India offer excellent investment option with affordable Premium
charges.How is Investment and Insurance combined?
There are certain insurance schemes that give you the combined benefit of insurance and investment. Such schemes have a compelling proposition of fulfilling the need for both savings and protection. They provide a flexible Term
and money back advantage. Such schemes generally guarantee liquidity at intervals in the form of guaranteed survival and Maturity
benefits. You can opt between traditional investment plans and Unit linked plans (ULIP). Both the investment plans come with their own merits and demerits.Traditional Investment Plan
A Traditional Plan
ensures a fixed and guaranteed rate of return. In this case, it is almost like investing your money in debt funds and fixed deposits, the maturity amount as well as the maturity time is fixed. You will get additions or Bonus
if these are specified on the policy. The condition of the market has no implication on such type of investments. Let’s take a look on traditional investment plans available in India:
Endowment investment plans are a type of traditional plans that guarantee a certain amount of return in addition to the insurance protection. In case the Insured
survives the period, the sum Assured
along with any bonus accumulated is paid back to the insured. In case of the insured’s death, the Sum Assured
combined with accumulated bonus if applicable is given to the nominee. It is an ideal option if you are not fond of taking market related risks.•Money Back policy
is another investment plan in which the insured is periodically paid Survival Benefit
at a regular interval, but in case of the insured’s death during the term, the nominee gets the complete sum assured with no deduction of survival benefit paid to the insured in his lifetime.•ULIP:
Unit linked investment plans
are market based, thus the returns depend on the type of funds and market conditions at the time of maturity. Hence, the return you get is very unpredictable. If you have the ability to take risks then this is the right type of investment, because if the market condition is good at the time of maturity you will get very high returns. ULIPs offer much wider variety when compared to the traditional life insurance plans, so you get multiple options at your disposal. ULIPs generally come in three broad categories:
•Aggressive ULIPs (that invest 80%-100% in equities, remaining in debt)
•Balanced ULIPs (that invests around 40%-60% in equities)
•Conservative ULIPs (that invest about 20% in equities).
This is just an outline of how the ULIP options are generally designed; the exact equity/debt distribution might vary from one to another insurance company. A ULIP Policyholder
gets the option to invest in a variety of funds, with different rates of return. If one does not have the desire to invest in equity, he can opt for a debt or balanced fund.