Capital Guarantee Plan

What is a Capital Guarantee Plan?

The capital guarantee plan is an investment plan that offers you the assurance of protecting your initial investment (capital) from potential losses. This is an insurance product that provides a combination of investment opportunities of a Unit Linked Insurance Plan (ULIP) and a safety net of a Non-Linked Guaranteed Return Plan. It ensures that you receive at least the amount they initially invested, regardless of market conditions.

What are the Key Features of a Capital Guarantee Solution Plan?

Following are some of the fundamental features of a Capital Guarantee Solution Plan:

• Balanced Investment Plan: This savings plan aims to strike a balance between risk and reward, which helps mitigate the downside risk associated with investments.

• Capital Protection: The primary feature of a Capital Guarantee Plan is the assurance that your initial capital will be protected, regardless of market fluctuations or investment performance.

• Potential for Returns: It allows you to participate in the potential growth of your investments while minimizing the risk of losing your principal amount.

• Ideal for Conservative Investors: This makes it an attractive investment option for cautious investors.

• Term and Maturity: You commit your capital for the defined duration ranging from a few years to decades. At maturity, you receive a 100% guaranteed principal amount along with any potential gains.

• Flexibility in Investment Plan Options: You have the freedom to allocate your funds among different investment portfolios or choose from a range of risk profiles based on your individual financial goals and risk tolerance.

• Professional Management: Financial professionals who have expertise in asset allocation and risk management typically manage Capital Guarantee Plans.

• Partial Withdrawals: You can withdraw any amount from your Fund Value after 5 years of lock-in period. Multiple withdrawals are allowed only for market link funds.

Can You Explain a Capital Guarantee Solution Plan with an Example? 

The TATA AIA Capital Guarantee Solution is an insurance product which is among one of the Policybazaar investment plans:

Suppose Mr Akhil is of age 30 years and decides to invest in TATA AIA Capital Guarantee Solution as per the following terms:

• Principal Investment Amount: Rs. 10,000 per month

• Premium Payment Term (PPT): 10 years

• Total Investment: Rs. 12 lakhs

• Policy Term (PT): 20 years

At the age of 50 years (20 years of policy term), Mr Akhil will earn the following benefits:

• 100% Guaranteed Return: Rs. 12.2 lakhs

• 10-year return from Whole Life Mid Cap Equity fund: 20.2% p.a.

• Market-Linked Returns from ULIP funds: Rs. 1.04 crores

• Lump Sum Payout: Rs. 1.16 crores

• Life Coverage Benefits: Rs. 14.6 lakhs

Capital Guarantee Solution Plans by Various Insurance Companies in India

Let us learn the list of capital guarantee plans from the table below if you invest as per the following conditions:

• Investment Amount: Rs. 10,000/ month

• PPT: 10 years

• PT: 20 years

Who Should Invest in a Capital Guarantee Plan?

A Capital Guarantee Plan is suitable for individuals who prioritize the protection of their capital while still seeking potential returns on their investments. The plan is particularly attractive to the following types of investors:

1. Conservative Investors-

   Those who have a low-risk tolerance and prefer stability over high-risk investments are ideal candidates for a Capital Guarantee Plan.

2. Risk-Averse Investors-

   Investors who are averse to market volatility and fear potential losses in their investments also find a Capital Guarantee Plan appealing.

3. Long-Term Savers-

   Individuals who have a long-term savings goal, such as funding their children's education or saving for a down payment on a house, may opt for a Capital Guarantee Plan.

Why Should You Invest in a Capital Guarantee Solution Plan?

Investing in a capital guarantee solution plan can offer several benefits to you, some of them are as follows:

1. Principal Protection:

   One of the primary benefits of a capital guarantee solution plan is that regardless of market fluctuations or investment performance, the plan guarantees that you will receive your original investment amount back.

2. Risk Mitigation: 

   A capital guarantee solution plan significantly reduces the market risks of your investment fund. As your principal amount is protected, you have a safety net in case the investment doesn't perform as expected.

3. Potential for Growth:

   The capital guarantee plans often invest in a diversified portfolio that aims to generate returns over time. By participating in the plan, you can potentially benefit from any market gains while still having your capital safeguarded.

4. Long-Term Planning: 

   Capital guarantee solution plans are typically designed for long-term investment horizons. If you have long-term financial goals such as retirement planning or funding a child's education, these plans can provide a stable and secure foundation for your investment portfolio. 

5. Peace of Mind: 

   Investing in a capital guarantee solution plan can provide a sense of security and stability. Knowing that your initial investment is safeguarded can reduce anxiety and allow you to focus on other aspects of your financial life.

6. Diversification: 

   Capital guarantee solution plans often invest in a diversified portfolio that includes a mix of asset classes such as equities, bonds, and other instruments. This diversification can help spread the risk and potentially enhance returns. 

7. Inbuilt Life Cover: 

   Along with 100% guaranteed returns, this plan also provides inbuilt life coverage of Rs. 13.5 life cover throughout the policy term.

8. Tax Benefits under Capital Guarantee Plan:

   You can avail of deductions from taxable income under Section 80C and and tax-free returns under Section 10(10D) of the Income Tax Act, 1961.

What are the Factors to Consider while Buying a Capital Guarantee Plan?

If you are considering a Capital Guarantee Plan in India, you must consider several factors for your best-suited plan. Here are some key considerations:

1. Investment Objectives

   The first step in choosing a Capital Guarantee Plan is to identify your investment objectives. What are your goals? Are you looking for long-term growth, regular income, or a combination of both? Once you have a clear understanding of your investment objectives, you can choose a plan that aligns with your goals.

2. Risk Tolerance

   While Capital Guarantee Plans are designed to minimize risk, there is some market risk involved. It is important to assess your risk tolerance and choose a plan to match the same profile. If you are risk-averse, you may prefer a plan with a higher guarantee of capital protection. If you are willing to risk, you may opt for a plan with potentially higher returns but a lower guarantee of capital protection.

3. Investment Horizon

   The investment horizon refers to the length of time you plan to hold your investment. If you have a short investment horizon, you may want to choose a plan with a shorter lock-in period. If you have a longer investment horizon, you may opt for a plan with a lock-in period or offer higher returns.

4. Plan Features

   Capital Guarantee Plans vary widely in terms of their features and benefits. Some plans may offer additional benefits such as different investment fund management strategies or partial withdrawals. Consider the features that are most important to you to choose a plan that meets your needs.

5. Asset Allocation

   You have the option to choose different funds under the Capital Guarantee Plan. Choose the fund with a diverse asset allocation to minimize market risk and generate higher returns. You can also choose from a variety of fund management strategies.

Why buy from Policybazaar?

Following are some of the reasons to prefer buying the Capital Guaranteed Plan from Policybazaar are as follows:

1. Zero Commission:

   Policybazaar charges no commission from you. You can save up to Rs 43,200 when you buy through Policybazaar, which would otherwise go in agent commission if you bought offline.

2. No Hidden Charges:

   Policybazaar follows the policy of full transparency. All the charges along with returns are clearly spelt out so you are fully aware of what you are buying.

3. Expert Advice:

   The certified advisors at Policybazaar are always happy to help the curious investors.  

4. Safety and Security:

   Policybazaar does not represent any particular insurance company and it always suggests products that are suitable for you. The company is regulated by Insurance Regulatory and Development Authority of India (IRDAI) to act fully in the interest of policyholders.

5. 100% Calls Recorded:

   Policybazaar takes full responsibility for their every sale. All the calls take place on a recorded line to ensure that the financial experts do not miss-sell a product to you. The company believes in utmost transparency & honesty.