Guaranteed Income Plans – Should You Invest in Them?

Coronavirus has led to increased awareness about the risks associated with investment products. Given the current state of the country, many people are facing financial difficultly. The risk to life and health is increasing, along with the cost of healthcare.

Individuals want to know how to invest money and increase returns. Considering this, life insurance is an ideal product that serves the purpose of safeguarding the financial needs of the dependant family members when the policyholder passes away. One such life insurance plan, which offers life cover along with regular payouts and maturity benefits, is a guaranteed income plan.

What are guaranteed income plans?

As the name suggests, the insurance company assures the payouts in case of a guaranteed income plan. As the plan offers a package of life insurance with maturity benefits and regular payouts, it is perfect for risk-averse investors.

A guaranteed income plan will offer a regular payout at a specific percentage of the sum assured, as chosen by the policyholder at the time of purchasing the policy. Moreover, you have the option to receive the income on a monthly, quarterly, half-yearly,or yearly basis.

This plan is a goal-based product. It offers guaranteed returns on investment to help you accomplish major milestones in life. You can purchase the plan to cover the expenses of your child’s education and wedding. Before you choose a plan, you need to know when to opt for a life insurance cover. If you are the sole breadwinner and have dependent parents, children, and a spouse, you must invest in a life insurance plan at the earliest.

Additionally, guaranteed income plans offer conservative returns, and you should factor in inflation before going ahead with the investment decision. This way, you will not get low returns.

What are the highlights of a guaranteed income plan?

In a guaranteed income plan, the assured monetary additions will accrue over time. You will receive these returns during maturity. You need to be careful when choosing the duration of the policy. In case of any untoward incident, your beneficiaries will receive the death benefit. Usually, the insurer waives off the premium in such a situation.

 Benefits of the plan

Here are some of the prominent advantages of a guaranteed income plan:

 Suitable for risk-averse investors

The plan offers a guaranteed return on investment, and it is appropriate if you have a low to moderate risk appetite. You will receive an insurance cover with guaranteed earnings in the form of periodic payouts.

  • Tax benefit

 A huge plus point of investing in a guaranteed income plan is the tax deduction. You can avail of a deduction on the premium paid under Section 80C of the Income Tax Act, 1961. Furthermore, the maturity benefits are exempt from taxation under Section 10(10D) of the Act, making this plan an effective tax saving investment.

  • Goal-based investment plan

You can invest in the plan to achieve long-term goals like retirement or purchasing a new house. Keep your objectives in mind before selecting a plan.

Should you invest in it?

Now that you are aware of how a guaranteed income plan works, you will be in a better position to decide. If you want a guaranteed return on investmentat low risk, you must opt for this plan.

If you want to retain a specific amount of corpus or wish to receive regular income over a period, this plan is a feasible investment option. While the returns may not be significantly high, they will be guaranteed. If you are looking for efficient tax-saving investments, this plan can prove beneficial.

A guaranteed income plan is a specially designed plan that cushions the corpus and keeps your investment safe from market fluctuations. So, if you have a low risk-taking capability, and are looking to earn decent returns, you can opt for this investment avenue.