What is Investment Insurance Plans?
As the name suggests, Investment insurance plan acts like an investment tool and provides you insurance coverage side by side. A part of the premium paid by you is utilized by the insurance company to provide investment opportunities in the life cover and the rest of the amount is invested in the instruments that are chosen by you. You can target long term goals or focus on short term investment plans depending upon personal reason for investment.
What are the benefits of such plans?
- It provides secured way of goal based wealth creation like child's marriage, child's education or retirement planning etc
- It provides flexibility to chose the investment period, various investments funds which suits his need.
- It provides both risk cover and maturity benefit.
- The premium paid attracts tax benefit under Section 80C while maturity amount attracts tax benefit under Section 10(10d).
- Unit-linked Insurance Plan : These plans are the most transparent form of insurance investments. Insurer deducts the charges for providing required cover, managements of funds and normal administration operations and rest amount is invested in fund chosen by life assured. Many plans provide flexibility to change funds in between for free or for nominal charges. One should go through past performance, charges structure; risk appetite while selecting ULIP plans. ULIPs should be bought with long term investment periods.
- Tax Saving Plans : Most of the plans today which are available in the market qualify for the tax deduction under Section 80C. Not only this, the lump sum amount received in the maturity of many plans is also Tax Free in nature under Section 10(10d). With this understanding the tax saving for any individual can vary from 10% to 33% depending on his/her income slab. Various ULIPs, traditional endowment plans becomes attractive keeping this feature in mind along with long term saving and investment of the hard earned money.
- Money Back Plans : These plans have unique feature of giving out certain amount of money at regular intervals to the individual while the balance amount is paid at the time of maturity. This also features death benefit and hence the complete sum assured is given to the nominee in case of untimely demise of the policy holder.
- Guaranteed Return Plans : In such plans the maturity amount is confirmed at the time of taking policy hence there is no uncertainty left on market conditions or quantum of bonus declare by the company. These plans are good for saving money for unavoidable events.
- Traditional/Endowment Plan : Under an endowment plan, the insured receives a lump sum after a specified maturity period or on earlier death. Typically maturity periods range from 10, 15 and 20 years till a certain age limit. Though investments strategy largely remains non-transparent but they are safer than ULIPs.