This Diwali, Bring home Prosperity & Bright Future with Life Insurance

Starting a new investment during Deepawali is considered not only auspicious but also great for long-term prosperity. This Deepawali, you should start an investment to achieve your goals and move towards long-term prosperity with unit-linked plans. However, with one difference, this time plan rather than leaving it on chance.

What to Aim For?

Every good investment plan has to have a definite goal if it has to be successful. Thus, your 2020 Deepawali investment too must have a definite goal. Here are a few examples of the kind of goals you can set for this investment:

• Wealth goal of Rs. 10 crores
• Child’s higher education goal Rs. 50 lakhs
• Second house property worth Rs. 5 crores
• A separate retirement corpus for your homemaker spouse worth Rs. 1 crore
• A corpus for business expansion Rs. 20 crores

You can have any other financial goal similar to this; just make sure the goal is valuable for you or your family in the long run. Otherwise, chances are you will find another more important cause and will leave the goal halfway.

Define Your Time for the Goal

While the first step is to set a target value for your goal, the next step is to define a clear timeline. Timelines for different goals may vary depending on the type of goal, your current age and the age of the person whose goal it is.

For example, the timelines for the goals above could be as follows:

• Wealth goal 20 years from now
• Child’s higher education 18 years
• Second house property 30 years (basically a retirement goal)
• Separate retirement corpus 30 years (depends on your current age and expected retirement age)
• Business expansion corpus 10 years

It is a no brainer that the shorter your timeline is, more will be the money you’d have to invest in the goal. This is why it is important to start investing in your life’s important goals early on.

Select Your Investment Plan

Your investment plan just needs a couple more things now - how much do you need to invest, and where. The ‘how much’ part will actually depend on the selected investment option, so first, we need to decide the ideal investment option for our goal.

1) Investment plan for Important Goals

If your goal is one of the important goals for your family such as a child’s higher education or retirement corpus for yourself or spouse. You will need the following:

• Safe investment option
• Possibility of market-linked growth
• More than one asset class investment
• Automatic allocation management for the safety of corpus
• Goal safety; i.e. the family can meet the goal even if anything happens to you midway
• Tax-efficiency, the maturity value should have low tax incident

2) Investment plan for Aspirational Goals

If your investment goal is aspirational, like the wealth goal or second house property, you will need the following aspects in your investment:

• Aggressive asset allocation
• Portfolio management
• Option to switch investment asset class depending on market conditions
• The flexibility of investing a higher amount

How Does ULIP Plans Fit Your Bill?

Unit-linked insurance plans offer all the features you need to achieve both necessary and aspirational goals. The best ULIP plans not only offer multiple asset classes for both aggressive and safe investors, but they also provide these features at low charges.

For example, Canara HSBC Life’s Invest 4G ULIP plan offers the following when it comes to your investment needs:

Asset Classes for Investment

The plan offers multiple equities, debt, balanced and liquid fund options. You can allocate your investment to more than one of these funds based on the type of goal and your risk appetite. You can decide the premium allocation ratio for each fund at the beginning of the investment and can change later if the market situation changes.

Growth for Safe Investors

If you are a safe investor you always have the option of allocating only to the debt funds in the plan. However, if you are investing for a long period, you can allocate a small percentage of money to equity fund as well.

The ULIP plan allows for growth and safety with the following features:

• Bonus Units: If you invest for more than 5 years and invest regularly, the insurer credits additional units to your plan. These are bonus units and add to the value of your portfolio every few years. The only condition is that you have been regular with your investments.
• Automatic Portfolio Management: The plan offers automatic portfolio allocation option where your entire equity corpus will be moved to liquid fund. This movement is done systematically over four years at the end of the policy term. This is to safeguard your accumulated corpus from equity market performance as you get closer to maturity.

Portfolio Management Options

The Invest 4G ULIP plan allows you to manage your portfolio manually or select one of the automated strategies. The benefits of using these strategies are two-fold:

• Take advantage of market opportunities
• Take the safest route of investing and withdrawing from the equity fund

The best mode of investing in equity funds is through SIP (systematic investment plan) mode, where you invest a fixed sum every month. However, if you want to invest a lump sum amount once in a year, you can select a portfolio strategy which will create the SIP for you.

Systematic transfer option parks your premium you have allocated for equity investment into a liquid fund. Then transfers 1/12th part of the units in the fund to equity fund every month for 12 months. Thus, even if you are investing just once in a year, you can create the SIP mode of investment for your equity allocation.

Tax Efficiency

You can claim a deduction of up to Rs. 1.5 lakhs a year under section 80C for ULIP investment. However, you can invest any amount in the plan. Also, the maturity value or any partial withdrawals after the lock-in period is over, are not taxable, provided:

• Your investments in any financial year have not exceeded 10% of the base life cover of the policy
• If it does, your investment amount will lose the deduction under section 80C and any withdrawals will also become taxable

Therefore, the recommended sum assured, if you are investing for more than 10 years is about 15 times your annual investment budget. So, if you are planning to invest Rs. 5 lakhs a year now for the next 15 years, you should choose life cover of Rs. 75 lakhs.

This will keep the window open for additional investment in the future when you can allocate a higher amount to this investment.

Also, any switches between the funds within one ULIP plan do not lead to additional tax. So, you can switch several times within a year without a tax-incident on your investment.

So, this Diwali start your investment for something valuable to you and your loved ones with ULIP plans.