ULIPs and mutual funds are two popular yet distinct investment avenues, each coming with its unique set of benefits and drawbacks. Know which one is better for your individual needs and preferences.
Plan Your Future with Policybazaar
Multiple life insurance plans are available in the UAE that can help you fulfil diverse financial goals. While individuals seeking death benefits opt for term insurance plans, those looking for significant returns in addition to insurance protection turn to ULIPs. However, under ULIPs, returns are not guaranteed.
So if you are a risk-averse investor and are looking for life insurance plans in Dubai that guarantee the capital, i.e., the premium that you invest, you can opt for capital guarantee plans.
Let’s understand what capital guarantee plans are about and how they can help you make capital guaranteed investments while also securing your family’s financial future.
Capital guarantee plans, also known as capital guaranteed investments and capital guarantee insurance, are a type of life insurance that guarantees the refund of the invested premium on the maturity or death of the policyholder. Usually offered as ULIPs, endowment plans differ from the regular ULIPs in terms of capital guaranteed investments.
Capital guarantee plans primarily invest your premium in debt instruments, although a limited part of the premium may also be invested in equity for returns. With these capital guarantee insurance plans, you can enjoy insurance coverage as well as investment returns during the policy tenure.
On the death of the insured individual, a guaranteed benefit is paid, the minimum being the premium that you have paid till death. On the other hand, if the plan matures, the fund value is provided which represents the invested premiums and the returns earned thereon.
Besides the availability of death benefits and maturity benefits, a key benefit of such plans is that you can also earn bonus additions that enhance the benefits payable. The bonus earned throughout the term is paid with the policy benefits.
Capital guarantee plans include various benefits for policyholders, with the major ones being summarised below –
As primarily life insurance plans, capital guarantee insurance plans offer insurance protection throughout the tenure of the policy. With this, the insurance protection ensures financial security for the policyholder and their family even if the former passes away during the tenure.
In such a case, the death benefits offered by the plan can help the policyholder’s family continue their lifestyle and fulfil their requirements without worrying about finances.
If your capital guaranteed investment plan facilitates market-related investments, you would be able to participate in the financial markets and earn attractive, inflation-adjusted returns on your invested premiums. These returns can help you accumulate a suitable corpus to fund your financial goals.
Even in the case of endowment plans, the bonus additions convert to investment returns and offer additional benefits on maturity or death.
Given the nature of the capital guarantee plans, your invested premiums are guaranteed to be returned even if the market suffers volatility. So even with the volatility of market performance, you can be secured in the knowledge that your capital investment would not suffer a loss and at least get the invested amount back in the case of market crashes.
As these plans are primarily savings-oriented life insurance plans, you can accumulate a financial corpus over the policy tenure when you choose long-term capital investment plans. This corpus can, then, be utilised to fund different types of financial goals such as retirement planning, higher education of children, buying a house or a car, and so forth.
As capital guarantee plans combine life insurance with capital guaranteed investments, you can certainly get such plans if you wish to get safe returns and avoid the hassle of having separate plans.
Generally, capital guarantee plans are suitable for individuals who are –
Looking for the return on the invested amount
Against the idea of a loss due to market volatility
Looking for stable returns from investments
If you want to invest in capital guarantee plans, here are some things that you should keep in mind –
Compared to other ULIPs available in the market, equity exposure in capital guaranteed investment plans is lower, which ensures a lower risk. At the same time, if the equity market is performing well, you may lose out on the return potential of equity funds.
You may not get a say in the funds into the funds in which the capital guarantee plan invests.
As capital guaranteed investment plans are available in a wide range of tenures, you should select a term that aligns with your financial goals.
The sum assured under the policy depends on the premium that you pay. To ensure adequate coverage, you can opt for a higher sum assured or add a term plan to your portfolio as well.
Numerous insurance companies offer capital guarantee plans in the UAE. To get the best plan for yourself, it is crucial to compare the available plans to choose the most suitable one.
Capital guarantee insurance plans are effective life insurance plans that offer insurance protection along with safe investment returns. If you wish to fulfil your insurance and investment requirements with just one plan and have capital guaranteed investments, these plans can be a good fit.
It’s worth mentioning again that multiple insurance providers offer such capital guarantee insurance plans. Thus, you should check and compare the available plans for guaranteed capital investment in UAE markets so that you invest only in the best policy for yourself.