Safety of capital, guaranteed returns, and regular income, what more can you expect from some of the best long-term investments from life insurance companies. Or can you? Life insurers beat a lot of other traditional investment options when it comes to long-term investments, especially if the task is the preservation of money.
These saving plans from the life insurance companies use the safest long-term fixed income options to grow your money. These plans are the best when it is about a goal that is as important as the future itself. For example, your child’s higher education plans, marriage goal, etc.
How to Buy the Best Savings Plan in India?
Your financial life has three continuously operating parts – income, expenses, and savings. Your present savings and where you park them will decide your financial future. In general, you will have responsibilities and goals which you need to see through every once in a while.
1. Understand Your Needs
Before buying a savings plan, understand your requirements. Answering the why question will help you broadly define what you are looking for and the terms and conditions of the investment. For example, if you are looking to fulfil your child’s higher education goal, you will need to select the following accordingly:
- Tenure of the investment
- Lump-sum or systematic regular payments of maturity value
- Premium paying tenure
- Goal or premium protection option
Knowing your purpose of investment will help you decide all these features for a perfect saving plan easily.
2. Know your Risk Appetite
Evaluate your risk appetite before investing in a savings plan. You may want to avoid high investment risk for financial goals like a child’s higher education or short-term goals like building a home soon. Your risk capacity for investment is higher under the following two circumstances:
1. You are young, i.e., below 45 or even 50
2. You have ample time to achieve your goal, i.e., 10 years or more
If these conditions are true for your investment goal, you can choose a unit-linked insurance plan or ULIP to boost your growth potential using equity funds.
Otherwise, or when you are not comfortable linking your money with the market, you can invest in guaranteed saving plans. These plans offer a guaranteed return over your investment, completely safe from market movements.
You also have the option of taking a middle path. ULIP plans also give you the option to invest in debt funds. These funds do not offer a guaranteed return. However, they do offer:
- Safety of capital
- Steady growth over long-term
So, you can enjoy the safety as well as the market linked yet steady growth of your investment.
3. Check the Liquidity of the Plan
Liquidity is an important factor to consider in a long-term investment. Liquidity allows the investment to support you in case of an emergency. However, too liquid investments may hamper your growth prospects.
So, there has to be a balance of growth and liquidity. Guaranteed saving plans are less liquid. However, after few years of investment, you can borrow from the plan or against the policy’s cash value.
ULIP plans, however, will allow partial withdrawals of accumulated money after the lock-in period of five years.
4. Understand the Policy Term and Features
Policy term is the maximum period for which your savings plan will remain active unless one of the following happens:
- A death claim is filed and settled on the policy
- You surrender the policy
If you have chosen the goal protection option under these saving plans, only the life cover stops existing after a death claim. The investment part continues to grow for the full policy tenure.
Other features you need to understand about the savings plans are:
- Premium payment tenure: Pay all the premiums due within this period. ULIP plans may accept investments even after this period but other saving plans may not.
- Automatic Portfolio Management: This is a feature of ULIP plans, which helps you manage your portfolio passively if you invest in equity funds.
- Goal or Premium protection option: This feature allows for the investment part of the plan to continue even after your death. If premiums are due, the insurer pays them on your behalf and your family receives the maturity value as you intended.
- Accidental disability benefit: Few savings plan will also allow accidental disability benefits, where you can continue the policy without paying further premiums in case of a severe disability. Or, you may receive financial support from the plan.
5. Review & Diversify Your Portfolio
Portfolio diversification is an important step to maintain a healthy portfolio risk-return profile. Also, your risk appetite and profile keep changing as your life progresses. So, you must revisit your portfolio asset allocation once in a while.
Your overall portfolio can follow the ratio given below:
|Up to 30||70%||10%||20%|
|30 – 35||60%||20%||20%|
|35 – 40||50%||30%||20%|
|40 – 45||45%||40%||15%|
|45 – 50||40%||45%||15%|
|50 – 55||30%||55%||15%|
|55 – 60||20% to 0%||70% - 80%||10% - 20%|
Otherwise, you can also follow the automated portfolio management feature of ULIP saving plans. This feature will adjust your portfolio automatically as you age, and your investment nears maturity.
Why Choose Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance?
Canara HSBC Oriental Bank of Commerce Life Insurance is an amalgamation of four large and trusted banks in India. Within a short period, the brand has built a portfolio of saving plans with above-average performance and modern features.
The insurer boasts of the following statistics as of the financial year 2020-21:
- 20,000+ Branches
- Rs. 20,586 Crores Assets Under Management as per 31st December 2020
- 98.12% Individual Death Claims Settled in FY 2019-2020 (Claim settlement ratio)
You can start investing in the company’s best savings plans online. These plans help you keep your money disciplined, which is one of the prerequisites for better growth and long-term wealth. You can automate your savings to go to a savings plan regularly without your intervention. The best saving plans reward you for investing for the long term. The plan providers offer multiple types of bonus and incentive options to earn money for investing in a long-term savings plan. For example, the Guaranteed Savings Plan from Canara HSBC Oriental Bank of Commerce Life Insurance provides loyalty additions and guaranteed annual additions to your investment.
The longer you stay invested the better the growth.