Investment In Times Of Covid-19 The Policybazaar Show

The markets have been volatile during the pandemic. Sensex crashed to 26,000 points in March from their highest levels of 41,000 points in January this year. The market has now revived to 38,000 points. Historically, data suggests that pandemic-driven market crashes are followed by big bull runs. During the SARS outbreak between January and March 2003, the Sensex had fallen by 11%. It went up nearly 80% after a year. Similarly, during the Zika outbreak, markets had fallen by 13.37% but after a year they had risen by 27.09%. Going by these trends, this may be a good time to start or even restart investing.

Vaccine release of Covid-19 should result in a market pullback by 2021. A lot of customers are exiting from the market given the Covid-19 pandemic. However, they must avoid a panic-driven exit from the market because they will incur losses from the invested amount.

Premium paid is 100% guaranteed in Capital Guarantee Plans
For new investors, the biggest fear is that their hard-earned money invested in the market at this time will get washed away. To solve this problem, Policybazaar came up with an innovative solution called Capital Guarantee plans. Capital Guarantee Solution is a mix of Unit Linked Investment Plans (ULIPs) and guaranteed return plans. Under this plan, around 50-60% of the invested amount goes into the guaranteed return products and the rest goes into ULIPs. You get the maturity value based on the upside on market-linked return from the ULIP component as well as returns on the traditional guarantee plan when your policy tenure ends.

The biggest advantage of Capital Guarantee plans is that the premium you pay throughout the policy term is 100% guaranteed. This means, upon completion of the policy term a customer is guaranteed to get back all the premium invested, hence safeguarding their investments in the current economic downturn.

Investors should buy ULIPs online if their investment horizon is more than 5 years. Online ULIPs have very low charges, there is no premium allocation charge and policy administration charge. They also offer flexible investment options, provide liquidity when you need it, help in keeping disciplined and regular savings, tax benefits, and provide life cover.

Create a rainy day fund
Given a lot of insecurity about employment during Covid-19 and salary cuts, young working professionals should create a six months worth rainy day fund. For example, if your monthly expense including house rent, kids' education fee, etc is Rs 50,000, then, you should have Rs 3 lacs liquid assets as a buffer. Any amount over and above that should be invested for life goals. The pandemic should not be a reason to stop investing in the future.

Retirement variant of Capital Guarantee Plans
Policybazaar has also introduced the retirement variant of Capital Guarantee Solutions. This is a combination of a whole life ULIP with a guaranteed return fixed income product. Let’s say you invest Rs 5000 monthly for the next 10-15 years till your retirement. When you retire, whatever money you invested will be returned which is 100% guaranteed. You will also get a monthly pension after retirement until you are alive. This pension as well as the lump sum amount returned on retirement is tax-free.

Guaranteed return plans safer than debt mutual funds
The new-age guaranteed return plans offer returns of about 5.5-6%. They come with a life cover 120 times of monthly premiums. They are also eligible for benefits under Section 80 (C). They offer tax-free returns also. Insurance companies have to mandatory invest 50-60% of insurer’s money in government security. So, guaranteed return plans are much safer than the best mutual funds.

Investing in Child ULIP plans is a wise option
Policybazaar offers Child Unit Linked Investment Plans which are investment cum insurance plans that allow you to invest and build a corpus over a period of time for your child’s future. The maturity amount is given to the child to cover his/her higher education.

The biggest advantage of these plans is that they provide a waiver of premium options wherein, in case of an unfortunate event of the demise of the parent, the future premiums are paid by the insurance company thus securing the child’s future. So, the parent’s demise doesn’t affect the plan's continuity. Lump-sum life cover is also paid out to the nominee. Some plans also have the benefit of providing monthly income to the child to pay for regular expenses.

Policybazaar caters to all kinds of customer segments
Policybazaar has structured its product portfolio into three types of customer segments. For people who want guaranteed returns, we have 100% guaranteed return products which give 5.5-6% tax-free returns. These are better than Fixed Deposit (FD) because returns from FD are taxable.

The second segment is Capital Guarantee plans which is the most popular on Policybazaar’s platform. In these plans, the customer gets guaranteed capital along with market upside. These plans give 8-10% returns which are tax-free. To cater to the third segment of customers who aren’t risk-averse and want the best returns, we have new-age ULIPs. These ULIPs are low cost and suitable for investors with a longer investment horizon.
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