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How to choose the best insurance plan that gives guaranteed income?

dateKnowledge Centre Team dateFebruary 04, 2021 views145 Views
How to choose the best insurance plan that gives guaranteed income?

In real life, unexpected expenses are unavoidable. Even when you believe you have financial security; a sudden or unforeseen financial commitment can severely diminish your financial condition. Due to certain emergencies, they may also leave you in debt. Although you cannot plan for every contingency that may arise, life insurance offers some protection against financial loss from unforeseen circumstances.

The company promises to provide financial coverage (Repayment of amount) against unforeseen events for a certain fee (premium).

Guaranteed Income Plan

It takes ongoing initiative and perseverance to meet financial goals in time, no matter what they are. Although needs can be infinite, yet a person's wealth can make or break them. Therefore, an individual needs to maintain financial stability throughout life to ensure that their loved ones are financially secure even after (s)he is no longer around them. To ensure financial stability, companies offer mandatory retirement plans.

The guarantee word being added to regular payouts, these plans become an investment's leverage for risk-averse investors. These plans provide dual benefits, including life insurance and maturity benefits and guaranteed earnings in the form of yearly, monthly, or quarterly payouts decided by the policyholder at the time of purchasing the policy. If you invest in a guaranteed income policy, you take on a risk of getting periodic payouts from the policy at maturity. The amount of payouts depends on your share in the company's sale (i.e., sum assured).

Features

  • It is a life insurance plan that will take payments from the beneficiary until the insured person dies.
  • Provides a vested reversionary option along with a fixed, forward-looking boost at maturity.
  • Offers retirement and death benefits, as well as payouts.
  • Provides the benefit of reduced tax liability.
  • Policy timeframe can range from 3-30 years.

Who Should Go for Guaranteed Income Plans?

If you are looking for a long-term plan that will provide for your lifetime, then this plan is perfect for you. Anyone above the age of 18 and between the ages of 18-60 can buy a guaranteed income plan and enjoy all the benefits that come with it. The policy term concerning the market's performance is 10-30 years, and it is not dependent on market performance.

What Benefits Do You Get from a Guaranteed Insurance Plan?

Upon maturity, you will receive a simple reversionary benefit and be paid a percentage of pre-decided sum assured later.

Death Benefit: If you die before the policy term ends, your estate will receive the sum assured plus a reversionary and terminal bonus (if any). The regular payout is guaranteed for a fixed number of years, as specified in the insurance policy. If the nominee dies during the payout period, the policy's proceeds are distributed to the nominee's bank account.

Income Tax Benefit: The guaranteed income plan offers a tax deduction (every year) for paying premiums for the plan and a tax exemption on the final balance.

RETURN COMPARISON

In this table, we can see how a guaranteed income plan is different from any fixed deposits plan-

GUARANTEED INCOME PLAN 100% FIXED DEPOSITS
Investment over 10 years (6 lakhs) Investment over 10 years (6 lakhs)
5.5% Return (tax free) 5.4% Return(taxable)
Return after tax is 5.5% 4.9%  |  4.6%  |  4.2%

Tax slab  10%  20%  30%
In Case of death in your family In Case of death in your family
6 lakhs Zero

BENEFITS OF A GUARANTEED INCOME PLAN

Maturity Benefit

After it reaches the age of maturity, they receive a simple reversionary bonus. The life insured receives the basic reversionary bonus at the time of maturity along with the life insured. Bonus for terminals, if any. If the pay-out period is approximately 15 years, the insured is then. The regular amount paid is a predefined percentage of the amount guaranteed. Bonus plan, if any. If the pay-out period is somewhere around fifteen years, then the insured is paid the amount determined by industry consensus.

Death benefit

In the insured's unfortunate death during the premium payment term, the nominee will be given the sum. In addition to the reversionary bonuses, the nominee receives the basic sum assured amount. Bonus for terminals, if any. And the pay-outs are carried out for the next 15 years or as mentioned in the following 15 years.In the event of the insured's demise after the payment period of the premium or during the pay-out period, the nominee receives the guaranteed amount together with the other advantages.

Income Tax Benefits

Every year, tax deductions and tax exemptions under Section 80(C) are available. Section 10(10D), subject to terms and conditions, is available for maturity proceeds.

Additional Rider

The traditional plan incorporates an included rider Accidental Death Benefit Liability Insurance. There are traditional insurance plans that offer 100% guaranteed returns, and non-traditional insurance plans that offer partial returns. There are different terms and conditions within a particular plan, and different plans can be suitable for differing needs.

ABOUT CANARA BANK GUARANTEED INCOME INSURANCE PLAN

Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited is a company formed jointly by three leading financial institutions – Canara Bank and Oriental Bank of Commerce, two of India's largest nationalised banks in terms of aggregate business, along with HSBC Insurance (Asia Pacific) Holdings Limited. The Joint Venture's shareholding pattern is that Canara Bank owns 51%, HSBC Insurance owns 26%, and Oriental Bank of Commerce owns 23%. Our goal is to lay out a wide variety of life insurance products backed by excellent customer service, so you can settle your life what you want. The Canara HSBC Oriental Bank of Commerce Life Insurance Smart Income Plan is a Non-Linking Non-Participating Plan.

Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited, formed by three leading financial institutions - Canara Bank and Oriental Bank of Commerce, will be the first-ever joint life insurance company in India. Our mission is to impart a range of transparent life insurance products and is backed by excellent customer service. Canara HSBC Oriental Bank of Commerce Life Insurance Smart Immediate Income Plan isn't linked to another plan but is a Non-Participating Plan.

Guaranteed Income Advantage Plan

The Guaranteed Income Advantage Plan can create a lifetime income for you and keep your finances in order. The plan is designed to protect you and your money. The plan can aid you with meeting short- and long-term goals. The advantages of the plan are outlined below to make it clear for you.

Benefits:

  • Pay the premium for limited-term health insurance coverage and get life insurance for the entire term.
  • Tax benefits are provided under the plan and maybe claimed off of one's tax return.
  • The rate-payers pay a higher premium increase.
  • The beneficiary mentioned by the policy will receive the death benefit if the insured is still alive.
  • The premium paid to death is 105% of the insured's premium.
  • The amount to be paid on the death of a policyholder is guaranteed.
  • The insurer can enjoy the loan amount that's insured on the policy.

ELIGIBILITY

CRITERIA MAXIMUM MINIMUM
ENTRY AGE 60 Years 3 years for a policy term of 15 years 6 years for a policy term of 12 years
MATURITY AGE 75 YEARS 18 YEARS
SUM ASSURED Based on board approved underwriting policy document Determined according to minimum annualized premium, entry age, policy term/ premium payment term
POLICY TERM 12 Years/15 Years 12 Years/15 Years
ANNUAL PREMIUM Rs.1,00,000 Rs.1,00,000

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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