Difference between Guaranteed and Assured Returns

Difference between Guaranteed and Assured Returns

Learn how guaranteed and assured returns differ the certainty level, payout timing, and how to choose the right option for your financial goals.

Written by : Knowledge Centre Team

2025-12-11

4323 Views

11 minutes read

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Life insurance and retirement plans are necessary to safeguard your family's future, but very often, the jargon used by the banks and insurance agents is difficult to understand. 

These kinds of misunderstandings can lead to many problems in the future. People may overspend or make extravagant plans with the confidence that their savings plans will cover them. Later, they may realise that the actual payout is much lower than expected."

This is a common issue faced by customers across the world, as they are expecting benefits from a policy that was never part of the contract. You may often hear terms like 'guaranteed returns' and 'assured returns' used interchangeably, but they are not the same. While both relate to the financial benefits of savings plans, they work very differently and can impact your payout. Thus, to make better financial decisions and avoid unpleasant surprises, it’s essential to know the difference between guaranteed and assured returns, starting with what each term truly means.

Key Takeaways

  • Guaranteed returns are fixed and must be paid by the insurer, regardless of their financial health or market conditions.

  • Assured returns promise a payout but are not legally enforceable; they rely on the financial stability of the bank or insurer.

  • Sum assured refers to the death benefit in an insurance policy, not to be confused with returns from savings or investment plans.

  • Guaranteed returns offer stability but often yield lower growth.

  • Always check the issuer’s credibility before choosing assured returns.

What are Guaranteed Returns?

Guaranteed returns are the amount of money you receive at the end of your investment or insurance plan, regardless of how the markets perform or the financial condition of your insurer or bank. When you choose a plan with guaranteed returns, the amount is fixed at the time of purchase, so you always know exactly what you will receive.

If you are someone who values financial stability, these  plans offer you predictable benefits and peace of mind.

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Key Features of Guaranteed Return Plans

  • You receive a fixed maturity benefit that is mentioned at the time of buying the plan. 

  • Your returns remain unaffected by market fluctuations or the performance of your insurer. You get the promised amount regardless of external conditions.

  • These plans are ideal if you prefer low-risk savings options and want to avoid market-linked volatility.

  • Along with investment benefits, you also get life cover. In case of an unfortunate event, your family will receive the guaranteed sum assured.

  • You enjoy tax benefits under Section 80C on premiums paid, and the maturity amount may also qualify for tax exemption under Section 10(10D), subject to prevailing tax laws.

  • Regular premium payments help you build disciplined savings and stay focused on long-term financial goals.

  • You get complete peace of mind knowing that your returns are protected, even if the financial health of the insurer or bank changes.

right-sum-assured-returns

Advantages of Guaranteed Returns

Regardless of its financial health, the insurance provider is liable to pay policyholder  the pre-determined sum of money upon maturity. Such plans involve fewer risk factors and often better benefits. Some of the key benefits are as follows : 

  • Certainty and Security: You get the confidence of receiving a fixed return, no matter how markets perform. The predictability of income helps you plan your finances better without worrying about economic fluctuations.
  • Protection Against Losses: Even during market crashes or economic downturns, your capital remains protected. You always receive the assured return, which acts as a safety net for your investment.
  • Suitable for Conservative Investors: If you prefer stable returns over high-risk opportunities, guaranteed returns are is perfect choice for you. They are perfect for those who want to protect their capital while earning a steady income.

Disadvantages of Guaranteed Returns

The amount for guaranteed returns is usually less than how much an assured return could be. This is because the bank wants to minimise its risk factor to avoid bankruptcy. Premiums may be higher. Some of the key disadvantages are as follows: 

  • Limited Growth Potential: You may miss out on higher returns from equity or market-linked options. Guaranteed return plans offer fixed income, which may not beat inflation in the long run.
  • Lower Rates of Return: Compared to other investment avenues, the returns are often moderate. This may affect your ability to achieve larger financial goals or build long-term wealth.
  • Lack of Flexibility: These plans usually have lock-in periods and limited liquidity. You may find it difficult to withdraw or adjust your investments based on changing financial needs.

Things to Consider before Buying a Guaranteed Life Insurance Plan

Before you buy a life insurance plan to meet your investment goals based on guaranteed returns, consider the following factors:

  • Non-participatory Plans: You should consider non-participatory plans because they offer guaranteed returns in the form of guaranteed additions, rather than relying on bonuses that depend on the insurer’s profits.
  • Convoluted Phrases: Sometimes banks claim to offer 'guaranteed returns of 126-138 % of annual premiums', but these are often convoluted ways of phrasing simple guaranteed returns, which are usually just 8-9% of the premiums.
  • Accuracy: Guaranteed additions are not the same as guaranteed returns because guaranteed benefits become valid when the policy reaches maturity, and the amount is rarely disclosed accurately to the customer.
  • Lower Guarantees: Guarantees come with a cost, and actual guarantees may be low to safeguard the bank's personal interests. The average internal rate of return in a plan is somewhere between 4-6% per annum, and sometimes even lower returns are paid out.
  • Start Dates: Guaranteed returns sometimes start on a later date in some cases, when some plans only begin adding guaranteed returns to the policy after a few years. Often, the payouts for guaranteed return savings plans are paid over a certain number of years after maturity.
    The death benefit is usually the higher of the Sum assured on maturity or the premium amount multiplied by a certain percentage. Sometimes, it is 105% of the total premiums paid and is more or less consistent across investment plans in India.

What are Assured Returns?

Assured returns are similar to guaranteed returns; you receive a fixed benefit regardless of how the market performs. Even if the market underperforms, you still get the payout you were promised.

However, assured returns are not always backed by the insurance company’s financial health. If the bank or issuer goes bankrupt or has insufficient reserves, you may not receive the assured benefit. In such cases, smaller banks often offer assured returns instead of guaranteed ones to avoid overextending their liabilities.  Some key Features are as follows:

Features of Assured Returns:

Assured return plans offer consistent and low-risk earnings. Here are the key features you should know before investing:

  • You receive a fixed return amount agreed upon at the time of purchase, regardless of market performance.

  • Your returns stay stable even if equity markets or other financial instruments fluctuate.

  • The returns are promised by the issuer, but they depend on the financial health and credibility of the institution.

  • These plans carry minimal risk, making them ideal if you seek stable income rather than high-risk, high-return options.

  • Most assured return plans have a lock-in period or fixed maturity date, during which the returns remain unchanged.

  • You may not be able to switch or withdraw funds easily before maturity due to rigid plan structures.

  • Compared to market-linked products, assured returns usually offer modest growth but higher predictability.

Sum Assured Does not Mean Assured Returns

There are different types of investment options available in India that offer an assured return on investment.

The minimum sum payable by the insurer in case of your untimely demise is referred to as the sum assured. This implies that the sum assured is the actual coverage offered by the plan you chose. It also directly determines how much money you have to pay a premium for your instalments.

The sum assured amount is something you have to look out for when picking out your investment plans.

  • Advantages of Assured Returns: Assured return investments offer stability and predictability. Let’s explore the benefits of choosing them for your portfolio.
  • Lower Risk: You can enjoy less risk when you invest in assured return products. These investments are often backed by assets with a consistent record of performance, offering protection from large financial losses.
  • Predictable Income Stream: Assured returns make financial planning easier by providing a steady stream of income. If you rely on investment income for your monthly expenses or plan to use it for long-term goals, this predictability brings peace of mind.
  • Diversification: Adding assured return instruments to your portfolio helps spread your risk. When combined with other assets, like equities or real estate, these investments offer stability and reduce the impact of market volatility.

Disadvantages of Assured Returns

While assured returns offer consistency and security, they also come with certain limitations that you should consider before investing.

  • Inflation Risk: One major drawback is that assured returns may not always keep pace with inflation. If inflation rises faster than your return rate, the real value of your money could decline over time.
  • Limited Investment Choices: Assured return products usually come with specific terms and conditions. You may have fewer options to customise or diversify your investments, which can limit your ability to match your financial goals.
  • Dependency on the Issuer: Your assured returns depend heavily on the issuer’s financial strength. If the bank or institution defaults or becomes insolvent, you may not receive your promised returns. That’s why it is critical to assess the issuer’s credibility before investing.

Things to Consider Before Buying a Plan with Assured Returns

Before buying an Assured plan, you should consider the following factors:

  • Risk Factor: Assured returns come with a risk factor that depends entirely on the insurance provider's financial health.
  • Bank's Financial State: Make sure that you research the bank's financial status over the past few years. Collect all the information about the bank before you buy a life insurance plan that offers assured returns.
  • Track Record: Try to find out the insurance provider's CSR. The Claim Settlement Ratio of any insurance provider is its track record of paying out insurance claims made by its clients. Canara HSBC Life Insurance have a CSR of 99.43%
  • Extra Guarantee: Check if your assured plans have guaranteed benefits that you can purchase at an extra cost. This way, you will get the benefits of assured sums as well as the guaranteed returns.

Comparison Between Guaranteed And Assured Returns Plans

Lets quick comparison between guaranteed and assured returns in the form of a table:

Parameter

Guaranteed Returns

Assured Returns

Definition

A pre-decided sum paid irrespective of market or company performance, contractually mandated.

A promised return that is highly probable based on company policy, but not legally guaranteed.

Backed By

The insurer’s/legal issuer's contractual obligation to pay as per the policy.

The company’s commitment or promise, not legally enforceable.

Dependence on Financial Health

Payment is legally required, regardless of the issuer’s financial health (subject to the solvency of the company).

Payout depends on the issuer’s ability to honour commitments; risk increases if the issuer faces issues.

Risk Level

Very low returns are protected and contractually binding.

Moderate returns are expected, but not legally protected.

Common Providers

Large insurance companies or highly regulated institutions.

Smaller banks, NBFCs, or lesser-regulated entities.

Regulatory Oversight

Strictly regulated by IRDAI (for insurance) or respective financial watchdogs.

May not have the same strict regulatory framework as guaranteed products.

Final Thoughts

While guaranteed returns, assured sum, and assured returns are all elements of life insurance policies and savings plans, you do not always have to buy two separate plans to avail of these benefits. Most policies offer both a sum assured and a guaranteed return, with the catch being that the you  will receive only one of the two. The risk you want to take on when you choose a savings plan may not always be clear at the outset, which is why you should have the necessary knowledge to choose the right plan for you.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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