Benefits of Guaranteed Income Plans

Most investment products including investment plans from life insurance companies return a lump sum amount to you on maturity. The idea is to generate a large corpus for a large financial goal. But what if the goal is to receive a regular income, and serve a financial goal over a period of time?

Guaranteed Income plans, also known as Money-Back plans, were essentially designed to serve this purpose. These products blend multiple offerings with regard to secure investments and a dash of financial protection into one large offering.

Let’s take a look at understanding all the benefits of these plans in this article.

Benefits Offered By Guaranteed Income Policies

Survival Benefits
The first benefits you should know are called “Survival Benefits”. Survival benefits are the assured payouts paid by a Guaranteed Income Plan when you live through (survive) during the term of the policy. Some insurers pay the survival benefit at predetermined intervals throughout the policy term, while others pay them at policy maturity.

The amount you receive as survival benefits can either be -

• A percentage of the premiums you pay every year, or
• A percentage of the sum assured you choose at the time of buying the policy.

The survival benefit payouts from Guaranteed Income Policies can be utilised to cover a variety of milestones, such as spouse or child’s monthly education expenses, home loan or car loan EMIs, and so on.

Guaranteed Returns
A Guaranteed Income Plan is a low-risk financial instrument. Unlike Mutual Funds, Unit Linked Insurance Plans, etc. where the returns are linked to the stock market performance, the returns payable under a Non-linked Guaranteed Income Plan are guaranteed. They are not dependent or linked to the stock market.

• If you pass away during the policy term, the insurance company will pay the death benefit to your nominee.
• If you survive the policy term, the insurance company will pay the maturity benefit to you.

So, you or your nominee will receive whatever the insurance company promises.

Maturity Benefit
Maturity benefit is the amount of money, the final sum, paid by the insurance company at the end of the policy duration chosen by you. Depending on the product you buy, the payable maturity benefit can either be -

• The sum assured and the bonuses accumulated under the policy.
• Only the bonuses accrued under the policy.
• The survival benefit in the form of periodic payouts.

Death Benefit
The death benefit is the amount of money that the insurance company will pay your family if you pass away during the policy term.

The death benefit -

• Includes the sum assured you choose at the time of buying the policy and bonuses (if any) accumulated under it.
• This benefit is over and above the survival benefits that are paid to you while you’re alive.

Collateral For Loans
Guaranteed Income Plans have a distinct feature. These plans can be used as collateral for loans. That is, you can use your Guaranteed Income Policy to secure a loan for buying a new car, a child's higher studies, a wedding, and other purposes.

For example, suppose you wish to get a loan to buy an apartment. In such a case, the Guaranteed Income Plan can be used as collateral for the home loan.

Dual Tax Advantages
Last but not least, Guaranteed Income Policies also offer dual tax advantages.

• The premiums you pay every year are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.
• The survival, maturity, and death benefit you or your nominee will receive are also entirely exempt from taxation as per Section 10(10D) of the Income Tax Act, 1961.
   

Wrapping Up!

So, that is all from our side today. Besides offering death, maturity, and survival benefits, there are a variety of benefits provided by a Guaranteed Income Plan. You can use the plan as collateral to obtain a loan. If you buy a Participating Guaranteed Income Plan, you will also receive bonuses. And, you can also avail tax benefits on the annual premiums you pay and the payout received under the plan.