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Should you invest in a long-term insurance product that gives guaranteed returns

Risk-averse investors have a limited number of choices in a volatile market. Consequently, such investors look for an investment product that prioritises capital safety even if the return rate is relatively low.

If you are a follower of this conservative school of thought, long-term insurance products with assured returns can be an ideal choice for you. In this article, let’s get to know what are the factors you should weigh before applying for such insurance products? Keep reading to know more.

Guaranteed Return Insurance Plan

Guaranteed return insurance plans provide the combination of insurance and fixed returns. These plans invest a portion of your money across various asset classes depending on your age and risk profile. You can either pay the premium amount in a lump sum during the beginning of the policy or pay small recurring premiums over a period.

Such plans aim to grow the policyholder’s money through capital appreciation during the policy term. However, the policyholder gets guaranteed maturity benefits on the maturity of the plan. Besides, the person also gets insurance benefits during the policy term to secure the family’s future if he is not around.

Factors To Consider Before Purchasing Insurance with Guaranteed Return

  • Age

Your insurance policy premium will cost less at a young age. If you plan to buy a guaranteed life insurance plan, the sooner you begin, the more benefits you get.

  • Financial Goals

Guaranteed plans work better for long-term goals. When you put your money into such plans for long term, say 15 to 20 years, your investment portfolio is shielded from daily market volatilities.

Moreover, you should also have a clear idea of the payout period. For example, some policies pay a lump sum amount at the time of maturity, while some policies aim to deliver you a regular pension for a certain period.

Be sure about the financial goals you wish to achieve from such policies.

  • Rate of Return

While guaranteed plans provide assured returns, they usually have a lower return rate than market-linked products. Therefore, those who are seeking high returns may not prefer these products.

However, these insurance products can be a good choice if you are a conservative investor who doesn’t want too much risk exposure.

Conversely, there are individuals who believe in keeping their investment and insurance profiles completely separate. In that case, you can consider buying a term insurance plan. Such plans provide high insurance coverage at a relatively lower premium.

Additionally, you can choose from a wide range of optional add-ons, such as critical illness rider, accidental death benefits, etc., with a term insurance plan. You can now focus on investing in plans that generate good returns as a good term plan can cover your insurance needs.

In any case, insurance and investments are equally important. Depending on your preferences, you can use both a term plan and a guaranteed return insurance plan to achieve your financial objective.

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