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Is it a Good Idea to Invest in a Savings Plan that Guarantees Regular Income?

dateKnowledge Centre Team dateMay 11, 2021 views57 Views
Guaranteed Income Plan | Retirement Planning

Each person has a different financial goal, an individual life experience, and a unique outlook towards risk and investments. If you are risk-averse and look forward to a stable, predictable, and sustainable income from your savings plan, guaranteed income policies offered by insurance companies could be the best saving plan for you. Whereas the term “guarantee” looks like a sales gimmick, it is true because guaranteed plans invest in safer instruments such as debts, bonds, and government securities.

6 Reasons to Buy Savings Plan that Guarantees Regular Income

#1 Builds Secondary Income Stream

You work hard each day to earn your monthly income. If your hard-earned money works equally hard in parallel, you will have a secondary source of income. With increasing volatility in the market, having multiple sources of income can help tide over temporary setbacks due to loss of jobs or reduction in the main source of income.

#2 Can be Used for Emergencies

Exigencies and emergencies do not come with advance notification. They are unpredictable both in time and magnitude. For example, if a portion of your house gets damaged due to harsh weather conditions, you may have to quickly fix the problem.

Healthcare costs are exorbitantly expensive, and all medical problems may or may not be covered by your existing health insurance plan. Having a guaranteed income in parallel can be useful on a rainy day. You can also avail of loans, at reasonable rates of interest on these policies to tide over such temporary setbacks in life.

#3 Helps to Build Wealth

Wealth creation requires holistic investment across asset classes. Even if you have Gold, Real Estate, and Stocks, it is prudential to invest in other financial instruments such as insurance policies that offer stable returns in the future.

In some plans such as Invest 4G, which has a Care Option. With that plan variant, even the nominee gets the fund value on maturity despite already receiving the sum assured in case of untimely demise. Check these finer features when you explore maturity benefits.

#4 Leave a Legacy Behind for your Loved Ones

A systematic investment spread over a long tenure will have a multiplier effect due to the power of compounding. You will see wealth grow in the latter years if you stay invested with a long-term horizon in mind. The wealth thus created will not only be sufficient to maintain your lifestyle, manage unforeseen expenses but also help you live a comfortable retired life. Any surplus can also be passed on to your next generation of family members.

The best insurers also waive off future premiums in case of untimely demise. The policy continues and the nominee gets the fund value at the end of the policy period.

#5 Insure your Life

Guaranteed Savings Plan from Canara HSBC Life Insurance is another investment cum insurance plan that supports the family even after the untimely demise of the policyholder.

Guaranteed income plans cater to your security needs after retirement and during the golden age. The best income plans also offer critical illness cover for your post retirement life.

In case of unfortunate, untimely demise or disability, the company not only pays the sum assured but also pays the future premiums and gives away the fund value on maturity.

#6 Increase the Sum Assured Based on Life Stages

Few plans such as Smart Life-Long from Canara HSBC Life Insurance allow you to increase or decrease your life cover as per your objectives and depending on your changing needs. This is possible from the 6th year subject to the sum assured being within the defined lower and upper limits.

A guaranteed income policy is the best saving policy in India and offers several features that help you get the best return on your investment. This makes it the best monthly income plan in India. Rest assured, you can have good peace of mind at work because you know this savings plan is working equally hard to provide for wealth and any unforeseen emergency.

Who Can Invest in a Savings Plan that Guarantees Income?

Income is usually the second phase of your retirement plan. Before you can think of investing in a plan to generate long-term income, you need a large corpus which you can put to the task. Building such corpus takes time and continuous investment.

Although you can legally start investing in these plans once you attain a majority and have an income, the investment benefits should be utilised as per need.

Thus, the best time to invest in a guaranteed income plan as per the plan features will be:

Plan Type Best Time & Mode to Invest
Single Premium Deferred/ Immediate Annuity Plan - Start closer to your retirement age, i.e., after 45
- You can invest in multiple annuities to create a monthly pension
Unit Linked Plans with Flexible Withdrawals - Start investing early, i.e., in your 30s
- Invest aggressively to grow your corpus before retirement
- Near your retirement switch up to 50% of your corpus to liquid funds while the other 50% should stay in debt funds for better yet stable growth
- You can opt for a systematic withdrawal plan to receive income from the plan

The amount to be invested and the type of policy to be chosen can be decided basis your current financial situation and your future needs. Insurance policy advisors can give you expert advice to help you make the right decision.

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