You may have financial responsibilities, such as your child’s education and marriage, meeting day-to-day expenses, fulfilling the dreams and aspirations of your loved ones, and more. Investing in the right plan can help you stay financially prepared to meet your goals.
Benefits of Investing
Below are some of the key benefits of investing:
1. Growth of money:
Investing money in the right plan can provide you with returns to help you achieve your financial goals. Investing helps you to not only grow your money but also stay financially prepared for your needs.
2. Impact of inflation:
Inflation is the increase in the cost of goods and services over time. This means, to purchase the same goods and services, you will have to pay more. You would need more money to buy the same amount of goods or services in the future. Investing money can provide you with returns that can help you factor for inflation in the future so that you can maintain your lifestyle and meet your goals without any worry.
3. Additional income:
Investing in the right plan can provide you with an additional income. This can be used to meet your financial needs, pursue a hobby, fulfil your aspirations, and more.
4. Financial discipline:
Investing in a plan regularly helps you build a habit to set aside an amount regularly for your future needs. This discipline also helps you reduce unwanted expenses and stay financially prepared.
Things to consider before investing
Here are some things to keep in mind before investing:
1. Returns from the plan:
You invest money to meet your future financial goal. The investment plan should be able to provide you with returns that can help you achieve them.
2. Risk appetite:
You may want to invest in a plan that provides you with guaranteed~ returns or market-linked returns as per your risk appetite and requirements. Plans like savings/endowment plans provide you with returns that are fixed at the time of the purchase of the plan. Plans like ULIPs (Unit Linked Insurance Plans) provide you with market-linked returns. In ULIPs, you can choose to invest in high-performing equity funds, low-risk debt funds, or a mix of both as per your risk appetite.
3. Investment flexibility:
You may want to invest in a plan that provides you with the flexibility to invest monthly, half-yearly, yearly or one-time as per your convenience. You may also want to look for features like the ability to withdraw money in times of need, choosing the duration for which you want to stay invested, choosing the amount that you want to invest regularly, and more.
4. Tax benefits*:
Look for a plan that provides tax benefits* under the Income Tax Act, 1961. These benefits increases the overall returns from the plan. The premiums paid towards life insurance plans are allowed as a deduction* of up to ₹ 1.5 lakh per annum under Section 80C. The payouts received from the plan are also tax-free* under Section 10(10D) depending on the type of plan you invest in.
Investment options in India
There are various options to invest your money in. You can choose the one that suits your requirements. A life insurance plan provides the dual benefit of life cover` and growth of your money, depending on the type of plan you choose. Below are the various types of life insurance plans that you can consider for investing:
Public Provident Fund (PPF)
PPF is a small-saving scheme backed by the Government of India. It comes with a lock-in period of 15 years. It is a long-term investment option offering risk-free returns.
You can open a PPF account with a bank or a post office with a deposit of a minimum of ₹ 100. Once you have a PPF account, you can deposit between ₹ 500 to ₹ 1.5 lakh every year in the account. The amount you deposit in your PPF is eligible for tax deductions under Section 80C of The Income Tax Act, 1961.
In case of PPF, the deposited amount, interest earned and maturity amount – are all exempt from taxes. The government decides the interest rates from time to time.
Mutual fund Investment
Mutual funds are managed by professional fund managers. They invest your money in instruments such as stocks and bonds, as per your choice. Mutual funds carry risks depending on the type of instrument your money is invested in.
Stocks or shares or equity
Stocks represent ownership in a company. You can purchase these through a stock exchange like BSE or NSE. Brokerage firms, banks and more can also help you purchase stocks. Stock prices rise or fall basis the company's performance, stock market conditions, and a mix of multiple other factors. Stocks are high-risk, high-return investments. As an investor, it is important that you conduct in-depth research before investing in stocks.
Bonds are debt instruments in which you lend money to the government or a business entity. When you invest in a bond, you get back your investment amount along with interest. This interest rate is also called coupon rate. You can invest in bonds either directly or through mutual funds. You can consider investing in bonds if you are looking for steady rates of return at a relatively low risk.
National Pension System (NPS)
National Pension System (NPS) is a government-backed investment plan. It is a long-term savings option that can offer you with income during your retirement.
You can invest between 18-65 years of age and continue investing till you are 75 years old. NPS offers tax deduction of up to ₹ 50,000 per annum under Section 80CCD(1B) which is over and above the limit of ₹ 1.5 lakh offered by Section 80CCE. While investing, you can choose to allocate your money in four asset classes – equity, government bonds, corporate debt and alternative investment funds (AIFs).
Fixed Deposits or Term Deposits
Fixed deposits (FDs) are offered by banks and non-banking finance organisations (NBFCs). You can deposit a lump sum amount for a fixed tenure of your choice and earn interest on the same. FDs are risk-free investments that offer a guaranteed rate of return and are not affected by market volatility.
Savings/Endowment plans are life insurance plans that provide the dual benefit of insurance and savings. These plans help you save money, and at the same time, provide financial security to your loved ones in case of any unforeseen event. Savings/Endowment plans provide guaranteed~ returns and are customisable. Most plans allow you to choose the premium you want to pay as per your requirements. You can also choose whether you want to pay the premiums monthly, half-yearly, yearly or all at once. These plans provide you bonuses, which add to the returns from the plan.
Money-back plans provide you with a large life cover` and additionally, return you the premiums you have paid towards your plan on maturity. This amount can be used to fulfil your long-term financial goals. You can also opt for riders/add-ons to enhance the coverage from your plan at a minimal cost
These plans are one of the best ways of securing your child's future financially. A child plan provides maturity benefits in annual payments or a one-time payout as per your choice. This amount can be used for your child’s higher education, wedding, starting a new venture, and more. Child plans also provide a life cover’, securing your child’s future even in case of an unfortunate event
Retirement plans help you stay financially independent during your retirement. These plans are primarily of two types:
- Retirement savings plans – These plans help you save for your retirement. They help you contribute regularly during your earning years and provide you with a large amount at the time of your retirement. This amount can then be invested in a retirement annuity plan to receive a regular income during your retirement years. You can consider investing in a retirement savings plan if you want to start saving for your retirement in your early years.
- Retirement annuity plans1 – These plans provide you with a fixed regular income during your retirement in exchange for a lump sum investment. You can choose to receive the income immediately or at a later age. This regular income can help you maintain your current lifestyle even post retirement. You can also fulfil your post-retirement goals, such as travelling, starting a new venture, pursuing a hobby, and more. You can consider investing in a retirement annuity plan if you are in your 50s and nearing retirement.
In addition to investing in a plan that suits your requirements, it is important to purchase a term plan for the financial security of your loved ones. A term plan is a pure protection plan that offers financial stability to your loved ones in your absence. It provides financial coverage for a specific duration, i.e., a term selected by you at the time of the purchase of the plan. ICICI Pru iProtect Smart is a term plan that provides life cover` till 99 years of age.
A term insurance plan provides you with a large financial cover for an affordable premium. You can also opt for riders/add-ons to enhance the coverage from your plan at a minimal cost. Below are the riders offered by ICICI Pru iProtect Smart Term plan:
- Critical illness rider^ (optional): This rider provides upfront money on the detection of any of the 34 critical illnesses covered by the plan. Submission of medical bills is not required. The amount can be used to cover treatment costs, day-to-day expenses, and more
- Accidental death benefit rider (optional)2: This rider provides an additional sum in case of an unfortunate event due to an accident. This additional sum is over and above the base sum assured provided by the plan
- Waiver of premium due to permanent disability rider3: In case of permanent disability due to an accident, this rider waives off all future premiums. This ensures that the life insurance policy stays active even if the policyholder is unable to pay the premium
- Terminal illness rider4: On the first diagnosis of a terminal illness, the entire claim amount provided by the policy is paid upfront. This helps to ease the financial burden off the family members during the difficult times
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' Life cover is the benefit payable on the death of the life assured during the policy term for ICICI Pru iProtect Smart Term Plan.
1. Annuity will be payable in arrears. The frequency of annuity payments can be monthly, half-yearly, quarterly or annually as chosen by the annuitant at the time of purchasing the annuity. The annuity amount chosen at policy inception is guaranteed for life.
* Tax benefits are subject to conditions under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for more details.
^ The critical illness benefit is an accelerated benefit and the death benefit will be reduced by the critical illness cover paid to the policyholder. The future premiums payable for the residual CI Benefit will reduce proportionately. In case the CI Benefit is equal to the Death Benefit, the policy will terminate on payment of the CI Benefit. Only a doctor’s certificate confirming the diagnosis needs to be submitted. On payment of Angioplasty, if the CI Benefit is more than `5,00,000/- the policy will continue for other CIs with CI Benefit reduced by Angioplasty payout. To know more about the illnesses covered, please refer to the Sales brochure. Available under Life and Health and All in One options. Critical Illness Benefit is limited to the age of 75 and Accidental Death Benefit is limited to the age of 80.
~Guaranteed benefits are payable subject to all due premiums being paid and the policy being in force on the date of maturity.
ICICI Pru iProtect Smart (Non-Linked Non-Par Life Individual pure risk premium product) UIN: