Insurance Blog

Factors to be considered before purchasing Investment Plans

Investment policies need a lot of study before purchase unlike term insurance products where we shall arrive at the purchase decision by just taking a few factors into consideration. Any investment policy has to be selected based on our requirement. This requirement can be identified by profiling. Profiling is listing out the financial details such as annual income, investment, other sources of income and loans. These details need to be kept side by side with the financial goals for the next 15 - 20 years. Now, a conclusion can be drawn on how much investment to be made and what is the required corpus.

After deciding the premium and corpus required, we can start browsing for investment plans which will fit our requirement.

Key elements to be considered, while purchasing investment Plans
1. Premium payment term:
Premium payment term, will decide the maturity returns that we would receive at the end of the investment period. Longer payment period is advised for people looking for high returns with low premiums. Otherwise, lower premium payment term with high premium rate is recommended for short term investors.

2. Policy term:
Policy term is to be aligned with the future goals. A 35 year old person who wants to retire at 55, needs to take a policy for 18 year only. This 2 years will give a chance to modify his plans or plan for next 10 years, if any contingency occurs.

3. Bonus rate/ Loyalty addition:
Bonus or loyalty addition will constitute the major chunk of returns. So, bonus/ loyalty addition should be high in order to yield better returns. These additions are generally announced every year, which will vary based on company’s performance. The bonus/ Loyalty history of the respective insurer have to be checked to get a fair idea of bonus rates further.

4. Money backs:
Some policies offer money backs, which will be given in regular interval of time till the policy term ends. Money back plans are good option if your financial status is instable. These plans will give less returns compared to other plans, as returns are being provided in multiple trenches before policy term ends. Still these policies are worth purchasing considering “Time value of money” (Value of money today is higher than value of money tomorrow).


5. Insurance cover:
All the investment plans from insurance companies will have life cover as their default feature. As the target is insurance, most people bat an eye for insurance part. But, insurance coverage part should be considerable enough to cover family financial security.

6. Lock in period:
Lock in period is the time the premium needs to be paid before the policy can be surrendered. This will be 3 years in most of the products, but will vary. Lock in period needs to be as low as possible, in order to close the policy if case of contingency.

7. Surrender value:

Policy when surrendered after lock in period needs to get high value rather than ending up with minimal returns. Agents won’t specify these details, because agents are not co-operating in surrendering policies, due to commission they are lose if a policy is surrendered. To check this issue policies can be purchased online from platforms like insurance web aggregators. This will simplify the process, make it transparent and provide hassle free customer service. 

By taking into account above factors, purchase decision of investment policy has to be done. This will ensure successful purchase and better returns.