Capital Guarantee Plans: Is Capital Guarantee Solution a Good Bet?
One of the biggest apprehensions people have is making investments in products which are market driven. Most commonly, first-time investors fear losing money in an unstable economic climate. Thus, there is a growing need for smart investment plans that put forth investor safety.
The capital guarantee plan is a special strategy that offers investors a 100% capital guarantee that came into existence as an intelligent investment scheme. The plan is basically a Unit Linked Investment Plan (ULIP) that combines the advantages offered by insurance and investment. Read on to know more about the plan, and explore if it is the right investment vehicle for you.
What is a Capital Guarantee Solution Plan?
Capital guarantee solution plans are a blend of ULIPs and guaranteed return plans. These plans fully guarantee and secure the money that investors have contributed over the years and allow them to make a profit from market gains by investing in stock funds.
About 50 to 60% of invested funds go to the guaranteed return products, with the remaining going to ULIPs. When the term of your policy expires, you get maturity value based on gains from market-linked returns from the ULIP component, as well as gains from the conventional guarantee plan.
The major benefit of these plans is that the premium you pay is completely guaranteed, which means your entire investment is secured, regardless of market uncertainties. It is recommended to explore investment options with long-tenure plans like the capital guarantee solution plan, given the low-interest rates that are now in effect.
Capital Guarantee Solutions in India
Following are the various capital guarantee solutions we have in India.
- Bajaj Allianz Life Guaranteed Income Goal: This is a non-linked, non-participating endowment life insurance plan that offers an option to extend life cover beyond the policy term. It offers income and lump sum benefits, along with a guaranteed increase in earnings under the income benefit. You will receive tax benefits under Sections 80C and 10(10D) of the Income Tax Act, 1961.
- Bajaj Life Capital Assure Goal: In this solution, you get an option to choose for limited premiums as follows:
5 years Policy Term: 5 years
10 years Policy Term: 5, 7 or 10 years
15 years Policy Term: 10 or 15 years
20 years Policy Term: 15 or 20 years
At maturity, the plan offers guaranteed income. The solution also offers death benefits in the form of a life assurance at the time of maturity.
- Canara HSBC Life Insurance Invest 4G: There are 8 fund options to choose from under this solution. Also, investors have 4 options for portfolio management, namely, systematic transfer option, safety switch option, auto fund rebalancing, and return protector option. Mortality charges deducted during the policy term would be added to the maturity fund value. It also offers three cover options- life option, care option, and century option.
- Edelweiss Tokio Life Wealth Secure +: There are 7 fund options to choose from under this solution. It has a low-term option of 5 years. Partial withdrawals are allowed after the first 5 years. It will provide you with incorporated life insurance to protect your family. Fund additions include loyalty additions, booster additions, and maturity additions.
- HDFC Life Capital Shield: This solution offers you a full guarantee of 100% of premium investments. You can get the benefits of market-linked profits without risking your savings. The assured maturity benefit would be 101% (standard T&C apply) of the total paid premiums. The plan also offers a death benefit, which is 105% (standard T&C apply) of total paid premiums. Loyalty additions will be added at the end of the 6th policy year if all premiums have been paid.
- HDFC Life Click 2 Wealth: This solution provides an option of 11 funds to choose from. Policyholders enjoy 101% of the premium allocated to their fund for the first 5 years of the policy term. In the event of the death of the proposer, all the remaining premiums get waived. This plan is suitable as a retirement plan since it provides systematic withdrawals that serve as a post-retirement income.
- ICICI PruSignature: This plan offers an option to choose from four different portfolio strategies. It also provides death benefit and maturity benefits. Partial withdrawals are allowed after the first five years of the policy term if all the premiums are paid, and provided the Life Assured is at least 18 years. The minimum partial withdrawal value is INR 2,000. You can also opt for a policy term extension before the policy matures.
- SBI Life eWealth Insurance: This plan offers dual benefits in the form of market-linked returns and life insurance coverage. There are 3 fund options to choose from under this solution. Investors would not have to worry about managing their finances with the automatic asset allocation facility. The policy terms range between 10 and 30 years. You can opt to pay your premium on a yearly or monthly basis.
- Tata AIA Life Insurance Fortune Pro: There are 11 fund options to choose from under this solution. The policy term ranges from 15 to 40 years. Loyalty benefits amounting to 0.20% of the total units in the fund would be added from the 11th year till the end of the policy term.
Does this Help to Plan for a Long-Term Horizon?
Short-term investments usually include a degree of risk as they are frequently made in lump sums and are susceptible to market fluctuations. When it comes to long-term investments, an investor can minimize the cost of investment by averaging out periodic investments over a longer period if they invest during market upswings.
You can select any insurance term under these plans, ranging from 10 to 40 years, and any premium-paying term from 5, 7, 10, or 12 years. You can select the policy and payment terms depending on your goal. Equities markets offer a strong return on long-term investments, so you should set aside 10 to 15 years for your investing horizon.
What are the Eligibility Criteria for Capital Guarantee Solution?
The eligibility criteria for capital guarantee solutions depend upon the initial investment age, the number of years until your investment attains maturity, the minimum investment amount, and the number of possible investment years. All the criteria vary from plan to plan.
In general, the minimum age requirement to start investing is 18 years for all the solutions, but the maximum age limit varies.
Should you Invest in a Capital Guarantee Solution Plan?
The capital guarantee solution plan is an option for investors who want to make long-term investments but do not want to take on the substantial risks associated with market-linked investments. To save for your retirement, pay for your children’s education, guarantee your spouse’s financial independence if unfortunately, you pass away, or accomplish any other financial goals, then you can invest in a capital guarantee plan.
Cash-guaranteed investments offer a risk-free alternative to pure market-linked products at any given time because the latter may not produce good returns prior to posing a risk to the invested capital in the event of a market decline. By guaranteeing life and financial security, the capital guarantee investment plans give investors peace of mind that their money is secure and help them build a solid financial foundation.
Considering that they provide capital protection and consistent returns, guaranteed insurance policies are increasingly preferred by consumers. Additionally, it allows customers to reduce the unpredictability of future revenue streams significantly, and life insurance offers the family financial security.
Investors who wish to make long-term investments but lack the necessary equity market knowledge may think about investing in the capital guarantee solution plan. In purely market-linked products, one may not get profitable returns if the market deteriorates because of prevailing economic circumstances. On the other hand, the capital guarantee solution plan assures returns to investors and assures financial security.
The capital guarantee investment plan offers its investors a safety net by promising guaranteed returns and the chance to take part in market-linked rewards. It is adaptable since it can meet both your long-term financial goals.
Frequently Asked Questions (FAQs)
Which is the best capital guarantee plan?
Although there are many plans available in the market, the most popular ones are offered by four premier insurance companies: Bajaj Allianz, Edelweiss Tokio Life, HDFC Life, and Max Life.
How does a guarantee fund operate?
The capital guarantee plan has a 10-year policy term with a 5-year premium payment term. It operates on a 50:50 ratio. It indicates that half of the money is invested in debt, and the other half in equity.
Are guaranteed income plans beneficial?
Capital guarantee plans are a wise investment because the income obtained and premiums paid under them are tax-free (subject to the terms and conditions). Additionally, a set rate of income is ensured even if the market declines because the plans have no direct market exposure.
What makes a capital guarantee solution a good investment?
f you have a low-risk tolerance and a desire for guaranteed returns and the safety of your money, you might want to consider investing in this plan. Safety, rewards, and liquidity are all objectives the capital guarantee plan is aimed at.
What kind of tax advantages does the Capital Guarantee Solution offer?
Section 80C of the Income Tax Act, of 1961 permits a tax deduction for the premium paid toward this plan. Additionally, Section 10(10D) of the Act exempts the collected bonus from taxes, including death and maturity benefits.