What Is Investment Insurance Plan? - Types & Benefits

By Okbima 16 Jan 2023 104
What is Investment Insurance Plan?


What is an Investment Insurance Plan?

Money is required at various periods of life. The corpus must be built by an individual whether it’s for a child’s education, a wedding, or retirement planning. When looking for different ways to build cash, one of the first things that comes to mind is to look into investing plans where your money grows while you sit back and relax. There is no straightforward solution due to the large variety of investing options. However, one of the best possibilities available is the simplicity of investment plans offered by most life insurance providers.

The simplest approach to accumulating wealth over time is through an investment plan. Various investing plans are available from life insurance companies. These are wealth-building products for when you need them in the future.


What are the various types of Investment Insurance Plans?

The following are the various types of Investment Insurance Plans:

Unit Linked Insurance Plan:  A Unit Linked Insurance Plan (ULIP) is a type of insurance that also serves as an investment. In a ULIP, a portion of the premium is deducted for insurance and the remainder is invested in the market. Depending on the investor, funds can be invested in bonds, stock, debt, market funds, or hybrids. It provides openness about your funds’ investments, which you can evaluate and track using Net Asset Value (NAV). ULIPs provide coverage as well as investment opportunities. You obtain the Maturity amount as a Survival Benefit, which is determined by the current unit pricing. The candidate will receive the sum assured as a Death Benefit.


Endowment Plan: The typical insurance policy with an investment possibility is the endowment plan. It’s a mix of protection and investment. Funds are not market-linked. The premiums you pay throughout the course of the period are split into two parts. A portion of the premiums is set aside as a risk reserve. The returns are assured with profit at maturity, however they are small. The nominee receives the sum assured if the investor dies before the maturity date.


Money Back Plan:  Money Back plans are a form of investment plan offered by life insurance companies that mix investment and insurance into one package. It provides mortality risk coverage as well as periodic payouts as a proportion of the total assured. Pay premiums for a set number of years and then receive rewards every year after the premium payment period has ended. The policyholder is paid on a regular basis. The remainder of the cash insured is repaid at maturity. There are additional terminal incentives included in the survival benefit. The coverage is paid to the nominee if the investor passes away during the term.


Fixed Deposit:  A fixed deposit, also known as a term deposit, is an investment in which the rate of interest is fixed for the duration of the term. As a result, the investor has a clear understanding of the expected returns on his or her investment when the FD matures. For risk-averse investors, this is an excellent investment strategy. Banks and financial organizations that offer FD programs have different interest rates.


Public Provident Fund:  It is one of the most popular savings and investment products, notably for saving taxes, and was introduced in 1968 by the National Savings Institute under the Finance Ministry of India. It requires a minimum yearly investment of Rs. 500 and a maximum investment of Rs. 1,50,000, with an annual interest rate of 7.6% compounded annually. Public Provident Funds allow you to pay your investment in one big sum or over the course of a financial year in up to 12 convenient installments.


National Saving Certificate:  NSC stands for National Savings Certificate and is a government-backed tax-saving investment. Any Indian citizen can acquire it at a post office throughout the country. They are available in denominations of 100, 500, 1,000, 5,000, and 10,000 rupees.It’s a good option for individuals who don’t want to take on too much risk or who want to diversify their portfolio by investing in a fixed-return product.


National Pension Scheme:  The National Pension Scheme (NPS), which was established in January 2004, is a government-sponsored pension plan created specifically for government employees. From 2009 onwards, this investment scheme has been extended to non-government employees as well. It caters to a variety of financial goals. An investor can opt to contribute as much as he or she wants to this pension scheme, or withdraw a fixed proportion of the corpus in a lump sum and invest the rest in annuities to develop a strong corpus for post-retirement years.


Mutual Funds:  A mutual fund is an investment plan managed by a professional Asset Management Company (AMC) that pools money from all of its clients and invests it in stocks, bonds, and other securities. These investments are made in accordance with each investor’s specific investing objectives and risk tolerance. To build a strong portfolio of bonds, securities, and equities, the units are bought and sold according to the current NAV (Net Asset Value).


Tax Saving Mutual Funds:  The sole tax-advantaged mutual fund is the Equity-Linked Savings Scheme (ELSS). It’s a long-term equity mutual fund having a three-year minimum lock-in duration and a Rs. 500 minimum investment amount. Despite market volatility, an ELSS mutual fund allows investors to realise long-term financial growth.


Bonds:  Bonds are debt investment plans that allow investors to lend money to an entity, such as a company or the government, that needs to borrow money for a set length of time and at a set rate of interest.


What are the benefits of an Investment Insurance Plan?

The following are the benefits of the Investment Insurance Plan:

> You get a secured source to invest your funds.

> You get to choose the number of years you want to invest for...

> You are able to make goal-based investments.

> You get maturity benefits on surviving the term of the policy.

> In case of death, the nominee receives the death benefit and hence the family is financially protected during the most unfortunate times.

> The premium paid for the investment insurance plan is eligible for tax deduction U/S 80C and 10(D) of the Income Tax Act.

> You are able to get a secured loan against the corpus built by you through investment or the surrender value of the policy at that point in time.

> You need not put your funds in two different places. Single source fulfills your investment as well as insurance needs.

> The amount paid as a premium as well as the yield on the investment made can serve to fulfill the retirement needs of the policyholder.

In case, the policyholder does not want to continue with the plan, he can opt to surrender and receive the surrender benefits, however, it can be done after a specific period or as defined by the insurance company of your investment plan.

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