Assured Savings Insurance Plan (ASIP) – Fixed Returns Plan with Life Insurance
Personal Investment is a complicated subject that can be simplified if the person is aware of his/her financial goals. Goal setting and balanced investment portfolio are the two critical things of any investment strategy.
Risks and Rewards are two sides of the same coin but in some scenarios, you can reap better returns even with less-risky investments. Fixed Income Investments are potentially low-risk investments that offer returns on a fixed schedule. Investment in Individual Bonds is a common type of fixed return investment.
In this blog, we have a look at some of the common fixed-income investment options and how you can generate better returns by still playing safe with your investments.
What is Fixed Income Investment?
Fixed Income Investments are investment vehicles that offer a fixed rate of return, with interest getting accumulated over a period of time. Investors who are very active with investments in derivatives and equities also invest in such plans as it helps in balancing the portfolio.
Fixed Income Plans are more reliable, as they yield regular returns akin to a fixed income. Retired investors prefer putting their savings in fixed income (or fixed return) plans since they get fixed returns over time. Unlike stock markets and mutual funds, the returns from fixed return plans do not depend on the volatility of the markets.
Common fixed return investment options in India
Three major focus areas of fixed return plans are safety, liquidity, and returns. Below are some of the common investment options that fall in that criteria:
- Fixed Deposits (FD)
- Public Provident Fund (PPF)
- Tax-free bonds
- Bank Recurring Deposits
- National Savings Certificate (NSC)
- RBI 7.75% Savings Bonds
- Post office Recurring Deposit
Though these schemes offer fixed returns (i.e. close to 7 percent), the interest rates for small savings schemes such as NSC and PPF were slashed by up to 1.4 percentage points for the first quarter of 2020-21. The COVID-19 pandemic has caused huge stress on the Indian economy and the low-interest rate regime was necessary for kick-starting the economy (Source).
An investment option that offers assured savings and life insurance is suited for investors that want the best of both the worlds (i.e. fixed return plans and life insurance).
Assured Savings Insurance Plan (ASIP) – Fixed return plan with insurance
ASIP vs other fixed return plans is a question that would come to your mind when we talk about returns and insurance. It is a pertinent question considering the state of the world (and Indian) economy. We delve deeper into ASIP and check why it is a product that is well-suited for the current scenario.
Assured Savings Insurance Plan is an endowment plan that gives you a lump sum payout to secure your future. It gives you guaranteed savings benefits to meet your non-negotiable goals. Apart from good returns, it also provides life insurance cover that will take care of your family, in case of the policyholder’s unfortunate demise.
ICICI Prudential Life Insurance offers Assured Savings Insurance Plan (ASIP) that promises guaranteed additions (GA). Depending on the policy term, 9 or 10 percent of the total premiums paid is added to the policy benefits at the end of each year.
ASIP also offers life cover for the entire policy term. Investors also enjoy Guaranteed Maturity Benefit (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 below:
|Policy Year||Premiums Paid for the Year||Total Premiums Paid Till 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||1,00,000||9% x 1,00,000 = 9,000|
|3||50,000||1,50,000||9% x 1,50,000 = 13,500|
|4||50,000||2,00,000||9% x 2,00,000 = 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|
|10||0||2,50,000||9% x 2,50,000 = 22,500|
If the policy is for 10 years, the Guaranteed Action (GA) will be 9 percent; whereas 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 have a look at the existing portfolio and decide whether you want to stay invested for long term or not. ASIP is a worthy investment option, as it combines the benefits of fixed return plans and life insurance. Assured Savings Insurance Plan (ASIP) from ICICI Prudential Life Insurance is one such plan that promises returns up to 9~10 percent.