Customising A Guaranteed Income Plan

A Guaranteed Income Policy offers guaranteed payouts at regular intervals throughout the policy period. These payouts can act as an alternative source of income and help in meeting expenses at various stages of your life. When you set out to buy a Guaranteed Income Plan (also called a Money-Back Plan), you will find that insurance companies provide a variety of options for customising your policy so that it meets your unique requirements. In this article, let’s take a look at some of the customisation options available with Guaranteed Income Plans.

Let’s dive right in!

Customisation Options Available With A Guaranteed Income Plan

• Customising How Frequently You Pay The Premiums
  The premium payment frequency indicates how often you must pay premiums to the insurance company. Generally, there are four premium payment frequency options available -

1. Yearly Premium Payment Option
   Here, you need to pay the premiums once a year.
2. Half-yearly Premium Payment Option
   Here, you need to pay the premiums once every six months.
3. Quarterly Premium Payment Option
   Here, you need to pay the premiums once every three months.
4. Monthly Premium Payment Option
   Here, you need to pay the premiums on a monthly basis.

You can select the most convenient premium payment option according to your needs. For example, if you have debts, and think you won't be able to pay the premiums once or twice a year, you can choose the quarterly or monthly payment options. Otherwise, you can select the other options.

Please note that you will have to make large premium payments under the yearly and half-yearly options. If you are not able to afford a large premium amount, it is ideal to go for quarterly or monthly payment options.

• Customising The Premium Payment Duration With Limited Pay

  Normally, you are required to pay the premiums until the end of the policy duration you select. Meaning, that if you opt for a policy duration of 20 years, you will have to pay the premiums for 20 years. Or if you choose a policy term of 30 years, you will have to continue paying the premiums till 30 years.

  Now, if you are unsure about your ability to pay the premiums till the end of the policy duration you select, you can choose the limited pay option. Basically, if you have a limited career span or expect an unstable or fluctuating income in the future, etc. you can choose this option.

  With this option, you can complete your premium payments in a limited number of years. You can finish paying the premiums in faster and larger instalments and enjoy your policy cover till the end of the policy term you choose. There are a variety of limited pay options available with Guaranteed Income Policies, such as 5-pay, 10-pay, 15-pay, etc. You can choose an option that suits your needs the best.

  For example, you buy a Guaranteed Income Policy for a duration of 20 years and choose a 10-pay limited pay option. In this case, you can finish all your premium payments in 10 years - and enjoy the cover for 20 years

• Customising How The Insurer Pays The Survival Benefits

  The survival benefits, i.e., the guaranteed periodic payouts you get under a Guaranteed Income Plan will be paid out during the benefit payout period. Depending on the plan, you can choose to receive the survival benefits after the premium payment period is completed, a few years after the policy term begins, or after the policy term expires.

  The length of the benefit payout period under your Guaranteed Income Plan will be determined under your policy schedule. The benefit payout period will differ from product to product - it can be as short as 5 or 6 years or as long as 25 or 30 years.

• Customising How Frequently The Benefits Are Paid By The Insurer
  Similar to customising the premium payment frequency, you can also customise the benefit payout frequency, i.e., how frequently you want to receive the survival benefits under your Guaranteed Income Plan.
  You can choose a payout option that corresponds to your milestones. That is, if you purchased the Guaranteed Income Plan to pay your child's monthly university expenses or the home loan EMI, you can select the monthly payout option.

Here are some common benefit payout options available under a Guaranteed Income plan -

1. Yearly Option
2. Half-yearly Option
3. Quarterly Option
4. Monthly Option

• Customising The Deferred Period
  The deferred period is the time period in which you have paid all of the premiums under your policy but the insurer has yet to begin making the payouts. The length of the deferred time under Guaranteed Income Policies will differ depending on the insurance company. It can be zero or greater than zero, for example, 2 years, 5 years, 10 years, 15 years, and so on.

  So, if the Guaranteed Income Plan you purchased has a deferred period of ten years, you will start getting survival benefit payouts ten years after you finish paying your premiums. If the deferred period under your plan is zero, the insurance company will begin paying the survival benefits as soon as your plan's premium payment term ends. And so on.

• Customising The Survival Benefit Amount Paid By The Insurer
  As discussed above, survival benefit is the assured payouts provided by the Guaranteed Income Plan. It can be a specific percentage of the premiums you pay or the sum assured you choose, depending on the product.

Now, some Guaranteed Income Policies in the market provide an Increasing Survival Benefit Option. This option allows you to enhance or increase the survival benefit amount you get on a yearly basis by a specific percentage. That is, you can opt to increase your benefit amount by, say, 5%, 10%, throughout the benefit payment term.

Your friend, for instance, buys a Guaranteed Income Policy with a sum assured of Rs. 20 Lakhs and pays an annual premium of Rs. 2 Lakhs. As per the policy T&Cs, she will get back 10% of the annual premiums paid by her as the survival benefit. This means that she will receive Rs. 20,000 as the survival benefit on a yearly basis.

Now, let’s say she selects the Increasing Survival Benefit Option with her policy. And as per the T&Cs, the insurance company will enhance the survival benefit by 10% every year. So, this is how the survival benefit payable under her Guaranteed Income Plan increase -

1. 1st Benefit Payout Year - She will receive Rs. 20,000
2. 2nd Benefit Payout Year - She will receive Rs. 22,000
3. 3rd Benefit Payout Year - She will receive Rs. 24,000 And so on.

• Customising The Policy With Riders
  Riders are optional benefits that you can select with your base Guaranteed Income Plan, at an additional premium. Simply speaking, riders provide additional coverage and protection against specific hazards. They offer a payout on the happening of a specific event. A critical illness rider, for example, will pay an additional sum of money if you are diagnosed with a serious illness listed in the policy document. There are several riders available with a Guaranteed Income Plan.
  Some of the most common ones you can select with your policy include -

1. Critical Illness Rider
2. Accidental Death Benefit Rider
3. Accidental Disability Rider
4. Hospital Care Rider
5. Surgical Care Rider
6. Waiver of Premium due to Disability Rider
7. Waiver of Premium due to Critical Illness Rider

Please note that this is just an indicative list. There may be more or fewer riders available with the Guaranteed Income Policy you are considering buying. So, check the brochure and policy wordings before you go ahead.

So, these are some of the ways in which you can customise a Guaranteed Income Policy. With these customisation options, you can ensure that your Guaranteed Income Plan is designed exactly as per your and your family’s specific requirements.