'12% returns if you know where to look': CA says this insurance loophole could beat FDs

In India’s fast-evolving alternative investment scene, a niche strategy is gaining quiet traction: buying pre-owned life insurance policies.

Chartered Accountant Meenal Goel highlighted in a LinkedIn post how investors can legally take over life insurance policies under Section 38 of the Insurance Act—a lesser-known clause that allows policyholders to assign their policies to others.

Here’s how it works:

• A policyholder unable to continue paying premiums transfers their policy to an investor.
• The investor takes over premium payments and, in return, receives the maturity benefits.

Since the policies are acquired at a discount to their final value, annualized returns of 9–12% are possible.

Importantly, Goel clarifies this is not about Unit Linked Insurance Plans (ULIPs), but traditional life insurance policies traded in secondary deals.

Still, she adds key caveats:

Returns vary by insurer credibility, policy tenure, and internal rate of return (IRR) assumptions.

Liquidity is low—investors must be ready to hold the policy to maturity.

It’s not a “get-rich” vehicle but a fixed-income alternative that requires careful due diligence.

This market remains niche and lightly regulated. It’s not for casual investors—but for those who understand insurance deeply, it could be a viable path to steady, above-market returns.