Best Investment Plans In India

Life insurance is often used as a form of investment, and is thus also referred to as the best investment plans. The plans offer a two-way benefit. Firstly, they offer the safety net of insurance where the insured and his/her nominee or family get the necessary cover to guard against any potential risks, and on secondly, they get an investment product that they can use to meet their goals – whether short-term or long-term.

These investment plans are essentially of two types, Unit Linked Insurance Plans or ULIPs that provides returns based on market performance, and traditional endowment plans that offer a lump sum or annuity payout at the end of the investment policy term when the life insurance investment policy matures. Both these types of savings schemes or investment plans offer a policyholder life cover and a savings option but differ in their construct.

The best investment plans invest the premium as paid by the policyholder in the stock market and gives them returns which are comparatively volatile as they depend on the performance of the stock markets – debt or equity. Whereas, an endowment plan offers lower but safer returns. However, a customer does not get to know where they are saving money or it is being invested due to the opaque construct of endowment plans, unlike ULIPs where they know where their money is being put. ULIPs offer customers the option to check the status of their investments through a figure called the Net Asset Value (NAV), among others. That’s why a ULIP is also known a best investment plan.

Nonetheless, endowment plans have their benefits. Where ULIPs give the investment policyholder a lot more flexibility and transparency, endowment plans act as a guaranteed savings plan option as they offer definite returns.

Types of Investment Plans

Life Insurance Investment Plans for Investment Planning

The best investment plan offers the policyholder both life cover plus the added advantage of saving money. A life insurance investment policy is always taken keeping a future objective in mind and this objective could be either a long-term or a short-term objective, like buying a house, child's marriage and education or just building up a retirement corpus. The best investment plan acts as a two-in-one solution.

Unit Linked Investment Plans (ULIP) for Investment Planning

Unit Linked Investment Plans or ULIPs as commonly referred to are a type of life insurance plan wherein the money paid as premium by the policyholder is invested into the stock markets. Each and every ULIP has a different set of funds that they invest in. Policyholders who invest in a best investment plan get a certain number of units of the fund. These investments are based on the correlation of the fund value of the fund they are investing in and the premium the investors have put in.

E.g., if Mustakeem is investing Rs. 10,000 in an Equity Fund which carries a Fund Value of Rs. 10, he would get 100 units of the Equity fund (Rs 10,000 divided by Rs. 10)

This best investment plan offers a higher but more volatile return as they are directly linked to the performance of the stock market. The higher the market grows the better the returns are and vice versa. ULIPs are the best investment plans or savings schemes as they help build up corpus at a faster rate than a traditional investment plan which offers lower comparative returns. ULIPs are a great investment option if one has the risk appetite and is willing to invest for the long-term to get good returns.

Endowment Plan for Investment Planning

Endowment plans are the traditional form of life insurance plans that offer a policyholder a life cover with very low returns. Endowment plans are usually taken by policyholders who are looking for a savings plan but one which offers them guaranteed returns in lieu of a higher life cover.

Endowment plans are the Best investment plan for investors who are not looking for a large corpus but are actually more concerned about keeping their money safe and secure, and still receive a certain amount of returns on their assets.

Guaranteed Return Plan for Investment Planning

These are savings plans that offer a guaranteed amount of money to a policyholder at the end of a specific investment policy term. The focus is on saving money for the future. The policyholder needs to compare and know that the guarantee he gets here is specific to set of terms and conditions of the plan. These conditions could be either a:

Highest NAV, which is usually in Unit Liked Investment Plan

Capital Guarantee, again offered by Unit Liked Investment Plan

Maturity Guarantee, offered by traditional endowment plans

Source: http://www.policybazaar.com/life-insurance/investment-plans/