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.
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.