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8 Reasons to Buy a Guaranteed Income Plan

dateKnowledge Centre Team dateFebruary 24, 2021 views122 Views
8 Reasons to Buy a Guaranteed Income Plan

Everyone dreams of a life when they have retired but do not need to worry about their financial situation. Even after retirement, they wish to have a fixed source of income that does not depend upon the market and provides them with the peace of mind necessary at that age.

Though there are various saving plans and insurance policies provided by banks and institutions, these plans fail to provide the regular and firm security that one experiences while still earning.

It may get confusing and tricky to find a plan or policy that matches all your needs while providing you the conditions that will not just benefit you after your retirement but also secures your loved ones in case of your demise. You need to take the premiums required to be paid, returns, terms and conditions, death benefits, coverage, and various such factors into consideration while deciding which plan suits you the best.

Guaranteed income plans are created to ensure you and your family remain financially secure even after retirement. This customizable plan is considered the best saving plan in India as it does not depend upon the market and ensures to provide you fixed returns at the frequency and rate that you deem fit.

What is a guaranteed income plan?

The word guarantee can assure a lot of people just by being present in an investment plan. A guaranteed income plan is a non-participating monthly income scheme. You choose to pay an annual premium for the duration of the plan. The duration can be decided as per your present age as well as your current financial condition.

Once the policy matures, you will receive a guaranteed payout that resembles a regular salary for a certain number of years. The number of years depends upon the insurance cover chosen, the premium paid, and the sum assured upon maturity of the plan. The policy term thus includes the duration for which the premium is to be paid and the duration for which the payout is received.

Key features of a guaranteed income plan

Once you have grasped the basics of a guaranteed income plan, the next step is to know what features this plan carries. Here are few common features of the monthly income scheme in brief.

  • Tax-free monthly income

    The plan ensures that once the premiums are completely paid, the policyholder can get monthly income payouts for a definite tenure. The income received under the plan is exempted from tax as per the Income Tax Act, 1961. Thus, the plan also carries tax benefits.

  • Double the guaranteed income

    The guaranteed income plan usually has a payout period that is divided into two parts. During the first part, the policyholder is paid the assured income monthly. Once the first half of the tenure is completed, the monthly income is doubled.

  • Immediate payout

    You do not have to wait for years after completing the payment of premiums to get payouts. As soon as the tenure for premiums is done, the policyholder can begin receiving the assured sum as the monthly payout.

  • Guaranteed protection

    The monthly income scheme also provides death benefits under its guaranteed protection. As per the norms, in case the policyholder dies during the tenure of the guaranteed income plan, then the person named under the nominee will get the option to either receive the death benefits as a lump-sum amount or as an income for ten years after the demise of the policyholder.

  • Flexible payout options

    There are times when one needs a large amount of money for emergencies. For this, they can choose the option of getting the payout after the maturation of the monthly income scheme as a lump-sum amount. Otherwise, they can choose to get it in the form of monthly income.

    These features may make a guaranteed income plan a viable and profitable option for people who are looking for an investment plan that ensures safety and benefits. One can customize these features as per their present and future needs to make sure that they get maximum benefits from the monthly income scheme.

    The final payout will ultimately depend upon the amount of premium chosen by the policyholder and the rate of interest offered for that premium.

Reasons to invest in a guaranteed income plan

Now that you have understood the terms and conditions that are listed under a guaranteed income plan, here are the benefits that one may get from the plan.

1. Alternate source of income

The best way to stay above your expenses and fulfill all the financial needs of you and your family is to have a regular income that you can depend upon. The guaranteed income plan offers that security so that even after retirement, your standard of living does not change by providing smart value income.

2. Maturity benefit

Saving for a long-term financial goal can be a tricky task when various plans do not offer the cushion of safety. With a guaranteed income plan, you can save up and get maturity benefits through lump-sum returns. These returns can help you address any urgent financial need that requires a hinge budget.

3. Family security

The guaranteed income plan works as a life cover as well. It provides financial protection to not just you after your retirement but also to your family. The plan is especially beneficial for those families who depend upon a sole person for all their financial needs. Most banks and policy providers also provide the option of waiving premiums for the rest of the duration of the policy in case of the demise of the policyholder.

4. Tax benefits

Most people choose to invest in insurance plans because of their varied tax benefits. Through the guaranteed income plan, you can save as much as Rs 1.5 lakhs as per the conditions that are listed in section 80C of the Income Tax Act, 1961.

5. Riders

You can also choose to combine additional riders with the monthly income scheme. These riders provide additional safety and coverage in case of accidental death, serious illness, extensive hospital bills, etc. With the help of the riders, one can rest assured that they and their family is covered under one single guaranteed income plan.

6. Flexible terms

The guaranteed income plan is one of the most flexible and customizable investment plans. The terms can be modified to make sure that they cater to all the present and future needs of the policyholder. You can choose the number of premiums, rate of interest, frequency of payouts, the amount received under payouts, etc. Thus, you can ensure that you get the best benefits from the plan.

7. Future financial needs

You may choose to save for your child’s higher education or for their marriage or a safety cushion that can support your retirement plan. No matter what your aim is, with the help of a guaranteed income plan, you can achieve it. The premiums and payout options can be varied so that they can meet your future financial needs and help you achieve every milestone in life.

8. Loan benefits

Once the guaranteed income plan has acquired the surrender value, you can use it to get a loan. One can avail of a loan amounting to 90% of the surrender value. Thus, if any sudden financial need occurs in life and you need immediate money, then the guaranteed income plan can work as a backup plan.

Most banks, such as Canara HSBC Oriental Bank of Commerce Life Insurance, have a definite premium payment term for all guaranteed income plans. The term lasts for 15 years. Any person from the age of 18 to 55 years can apply for the plan to secure their future. The complete policy term is of 25 years; thus, the maturity age ranges from 43 to 80 years.

The policyholder can choose to pay the premiums either every month or yearly. The premium amount is chosen by the policyholder depending on his or her age, premium mode, and the amount of payout chosen. They offer the payouts after the 120 months of the policy term. That is, on the 121st month, you can start receiving payouts. The return benefits amount to 100 times the chosen monthly income. The policyholder is also eligible for a yearly bonus so that they can address any surge in their expenses.

A guaranteed income plan packs a variety of options and benefits that can help you get peace of mind once you retire. It can also help you provide for any large expenses of your family in the future. Before choosing the monthly income scheme, you must verify your current financial situation and draw out future plans and needs. You can also take advice from a representative of the policy provider to make an educated decision based on true facts.

The monthly income scheme can ensure that you can maintain your standard of living irrespective of the market condition once the term insurance plan matures. This guarantee makes it one of the most attractive and dependable investment plans.

However, you should note that the rate of interest that they get on the amount of premium paid will vary as per the plan chosen. You may not want an interest rate of 4% for a long-term investment plan. Thus, the choice for all the factors should be made with proper consideration.

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Frequently Asked Questions

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns if you invest in this savings plan. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

Who should invest in a Savings Plan?

If you are looking for a guaranteed income plan, then saving plans should be on your list of investments that you are planning to make. Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Saving plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These saving plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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What is the difference between saving and investing?

Saving is the money that you keep aside for emergencies or for buying any big-ticket item. Investing means growing or multiplying the wealth that you have by buying savings plan, or any other assets. Buying a savings plan will help you in achieving your investment goals such as retirement, your child’s higher education or marriage, or for buying a new house.

Which savings plan is best for retirement?

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement. Also, Guaranteed Income4Life is also another savings plan that you can consider for building your retirement corpus as it acts as a guaranteed income plan that will provide you maturity benefits to manage your post-retirement expenses.

Which savings plan is best for long-term goals?

Smart Goals Plan is a savings plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals. Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide variety of saving plans that you can invest in as per your risk appetite and investment goal.

Which savings plan is suitable for girl child?

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child. Monthly Income Advantage Plans are also a good option if you are planning to invest in a savings plan for your girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having the best savings cum guaranteed income plan in your portfolio is extremely important. Savings plan ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

What is a monthly income advantage plan?

A monthly income advantage plan ensures that you lead a stress-free life with your loved ones as it provides a life cover along with giving you guaranteed monthly income. In short, it is a life insurance and income plan that will financially secure commitments made to your loved ones. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income Advantage Plan is a monthly income advantage plan that provides life cover for the entire term while you pay premium only for a limited period.

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What is a good age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding in a savings plan. Invest in an income plan as early as possible to build a significant corpus that will later help you in life. Ensure that you buy the best saving plan in India that can be aligned with your investment goals.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. The best saving plan offers a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner. Buy a monthly income advantage plan that will generate a steady source of income for you to take care of both long-term and short-term financial goals.

How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in an income plan, it always pays well to start early. The earlier you start investing in a savings plan, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested in the best saving scheme for a long time can give substantial returns due to compounding. Buy the best savings plan as soon as you start earning to achieve all your milestones on time.

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How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Buy the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment. Consider investing in a monthly income advantage plan to assist you in fulfilling your financial goals.

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How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits, which makes them a good investment choice for investors looking for income plans.

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