Insured Savings Insurance Plan (ASIP) – Fixed Return Plan with Life Insurance – India Education | Latest Education News | Global education news
Personal investing is a complicated subject that can be simplified if the person is aware of their financial goals. Goal setting and a balanced investment portfolio are two essential elements of any investment strategy.
Risks and rewards are two sides of the same coin, but in some scenarios you can get better returns even with less risky investments. Fixed income investments are potentially low risk investments that offer returns on a fixed schedule. Investing in individual bonds is a common type of fixed return investment.
In this blog, we take a look at some of the common fixed income investing options and how you can generate better returns while still playing it safe with your investments.
What is fixed income investing?
Fixed income investments are investment vehicles that offer a fixed rate of return, with interest accruing over a period of time. Investors who are very active in derivatives and equity investments also invest in such plans as it helps to balance the portfolio.
Fixed income plans are more reliable because they produce regular returns similar to those of fixed income. Retired investors prefer to put their savings in fixed income (or fixed return) plans because they earn fixed returns over time. Unlike stock markets and mutual funds, the returns of fixed income plans are not dependent on market volatility.
Common Fixed Return Investment Options in India
The three main areas of interest in fixed return plans are security, liquidity, and returns. Below are some of the common investment options that meet these criteria:
- Term deposits (FD)
- Public provident fund (PPF)
- Tax-free bonds
- Recurring bank deposits
- National Savings Card (NSC)
- RBI Savings Bonds 7.75%
- Recurring deposit at the post office
Although these plans offer fixed returns (i.e. almost 7%), the interest rates of small savings plans such as NSC and PPF have been reduced by up to 1.4 percentage points. for the first quarter of 2020-2021. The COVID-19 pandemic has caused enormous stress on the Indian economy and the low interest rate regime was necessary to revive the economy (Source).
An investment option that offers assured savings and life insurance is suitable for investors who want the best of both worlds (i.e. fixed return plans and life insurance).
Insured Savings Insurance Plan (ASIP) – Fixed yield plan with insurance
ASIP compared to other fixed return plans is one question that would come to your mind when we talk about returns and insurance. This is a relevant question given the state of the global (and Indian) economy. We dig deeper into ASIP and check why it is a well-suited product for the current scenario.
The Insured Savings Insurance Plan is an endowment plan that offers you a lump sum payment to secure your future. It offers you guaranteed savings benefits to reach your non-negotiable goals. Besides good returns, it also offers life insurance coverage that will take care of your family, in the event of the unhappy death of the insured.
ICICI Prudential Life Insurance offers Insured savings insurance plan (ASIP) which promises guaranteed additions (GA). Depending on the length of the policy, 9 or 10% of the total premiums paid are added to the policy benefits at the end of each year.
ASIP also offers life coverage for the duration of the policy. Investors also benefit from the Maturity Guarantee (GMB) where a guaranteed lump sum is payable at the end of the policy term.
Let’s look at a scenario where the annual premium is Rs. 50,000. The Guaranteed Additions (GA) will be as follows:
|Insurance year||Premiums paid for the year||Total premiums paid to date||Guaranteed addition for the year = GA rate x sum of all premiums paid|
|1||50,000||50,000||9% x 50,000 = 4,500|
|2||50,000||1,000,000||9% x 1,000,000 = 9,000|
|3||50,000||150,000||9% x 1 50,000 = 13,500|
|4||50,000||2,000,000||9% x 2,000,000 = 18,000|
|5||50,000||2.50,000||9% x 2 50,000 = 22,500|
|6||0||2.50,000||9% x 2 50,000 = 22,500|
|7||0||2.50,000||9% x 2 50,000 = 22,500|
|8||0||2.50,000||9% x 2 50,000 = 22,500|
|9||0||2.50,000||9% x 2 50,000 = 22,500|
|ten||0||2.50,000||9% x 2 50,000 = 22,500|
If the policy is 10 years, the guaranteed action (GA) will be 9%; while the GA is 10 percent for the policy term of 15 years. None of the fixed return plans offer such high returns, especially in these volatile market conditions.
While deciding on other fixed return plans, it is essential to look at the existing portfolio and decide whether you want to stay invested for the long term or not. ASIP is an attractive investment option, as it combines the advantages of fixed-return plans and life insurance. ICICI Prudential Life Insurance’s Assured Savings Insurance Plan (ASIP) is one such plan that promises returns of up to 9-10%.