Best Life Insurance Plans From Top Insurers

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It is said a smart person always saves the income for a future emergency but the smarter one invests the income even more smartly to increase the saving. Thus, it is very important that whenever you decide to invest, check out all the options available in the market and if it will match your requirements or not.

In this article, we will explore the types of investment and which one is apt for you.

Types of Investment Plans

  1. Traditional Life Insurance- In this, a person buys a life coverage policy for a fixed period and pays the premium for that annually, monthly or quarterly and receives the sum assured as mentioned in the policy. It can be for long-term (for instance, the money received after the death of insurer) or short-term (for car or house or education purpose). It is for those who prefer to do safe investment with guaranteed coverage.
  2. ULIP (Unit Linked Investment Plans) – This policy is apt for those who need life insurance + investment profits. In short, under this policy, some part of the premium you pay will be invested in mutual funds, which will further be invested in stocks. Thus, here the insured receives the insurance coverage as well as fund unit as per the performance of the stock in which his/her money is invested. ULIP is also flexible as you can anytime increase the policy amount. It is also a good way to save tax, however, it is expensive.
  3. Mutual Funds- This is for only for those who just want to invest. In short, here the funds of different policy owners are directly invested in stocks of various industries and thus, the policy owner receives the return on investment as per the performance of the stock and the number of the units he/she purchased. It keeps on fluctuating, thus, the risk involved is high. Moreover, there is no tax benefit for the investor as such. Now, you may think, why invest in mutual funds, if it is volatile, risky as well as offers no tax benefits?mutual funds optionsThe point to keep in mind is that it is not that costly and can offer tax benefits as per section 80 C if one invests in Equity Linked Savings Scheme. So, the dividend you receive after investing is completely tax-free. Moreover, one does not need to be an expert to invest in this plan. Still if required, you can hire an expert.

If you are wondering, which method will be the best for you to invest in mutual funds, then ‘Systematic Investment Planning’ is your answer. SIP allows you to invest your money on mutual funds on a fixed period. In short, you can purchase units, every month as per your choice. Plus, as mentioned before, the mutual fund is not expensive so you can start your investment with an amount as low as Rs. 500.

Here, how you invest depends on the Net Asset Value. If NAV is high, it is obvious you will buy fewer units and if it is low then, the units bought will be more.

Comparison Chart of Traditional Life Insurance, ULIP, and Mutual Funds

Basis

Traditional Investment

ULIP

Mutual Funds

Objective

If one needs life coverage. Life protection

It is apt for both protection and investment

It is purely for investment purpose

Investment Return

Sure return but very low

The return may vary because of fluctuation In the case of the investment amount. However, the insurance coverage amount will be given.

Highly volatile, thus, returns depend on the performance of funds.

Tax Benefit

The tax benefit is given as per section 80C

The tax benefit is given (Sec 80 C)

No tax benefit unless invested in ELSS

Flexibility

No flexibility at all

It is flexible as the investor can decide how much amount to spent on insurance and how much mutual funds

All funds collected are spent on shares.

Regulated by

IRDA (Insurance Regulatory and Development Authority)

IRDA (Insurance Regulatory and Development Authority)

SEBI (Securities and Exchange Board of India)

Security

Very secure because of guaranteed returns

Not so secure

Same, not so secure

Which is better

Best in terms of insurance protection i.e. life security but no investment benefits

Midway as it is apt for both investment and insurance (security).

It is just for investment purpose with no insurance benefits

Transparency

Not transparent at all

Transparency is there if one knows where the company has invested the money

Completely transparent. One can track the investment portfolio quarterly.

Money return period

Till the insurance is not mature

One needs to invest for at least 3 years to let the investment develop

One can buy or sell anytime. No restriction. Though long period investment is suggested for high returns.

Few Other Options Available Where One Can Invest

  • Fixed Deposit- It is apt for those who need to save money without taking any risk at all. Here, the person with a bank account can easily open the fixed deposit account and deposit the money for the desired period. Hence, it is also called a term deposit. The deposited money keeps on multiplying as the customer receives a rate of interest as decided by the bank (Rate of interest is high for fixed deposit account than other accounts and may vary from bank to bank).
  • Gold and Silver- Investment in metal especially gold is considered very beneficial. Gold is something that will always remain precious no matter which period we are. Thus, investment on gold is bound to give good returns on your investment
  • Real Estate- Investing in properties is not a bad idea. The population is ever-increasing, so the demand for land will also increase in the long term for setting up industries, hospitals, schools, and residential projects. The price of land always increases after a few years. People who bought land on the outskirt of cities 5-10 years back have experienced a dramatic price rise in recent years.

Earning money may be hard but investing it properly and wisely is the event harder. It is good to remember that investment requires patience and long term vision. So there is no need to jump to a conclusion without thinking properly and you should always go for long term investment as returns will be higher.

Naval Goel is the founder of PolicyX.com. He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.
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