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Guaranteed Income Plans: Should you go for them? Here’s all you need to know



Life insurance serves the purpose of safeguarding one’s financial needs when one is not around. Hence, you need to understand at what point in life you should opt for a life insurance cover.

For instance, if you have dependents such as parents, spouse, and children, you should opt for a life insurance cover. However, if you do not have any dependent on you, generally there is no need to get a life insurance policy.

With various types of life insurance policies available in the market, it also becomes difficult to choose from. To provide financial stability to people, many insurance companies have come up with a variety of products. Guaranteed income plans, for instance, cater to risk-averse investors. This plan offers life insurance and regular guaranteed payouts along with maturity benefits.

The guaranteed income plan provides regular income. This regular income is at a pre-defined percentage of sum assured chosen by the policyholder at the time of buying the policy. The income can be received either yearly, half-yearly, quarterly or monthly.

With guaranteed income plans, the guaranteed additions accrue over a period of time and are paid at the time of maturity, based on the duration chosen by the policyholder. In case of the policyholder’s death, the nominee of the policy gets the death benefit. Also, after the death of the policyholder, the premium payment is waived off in most cases. The guaranteed annual payouts after the policyholder’s death are provided as agreed upon while buying the policy, at the specific points in the policy term.

What do Guaranteed Income Plans offer?

Usually, long-term guaranteed products offer conservative returns, hence, before opting for such a plan, experts suggest policyholders should factor in inflation with the value of their investments. This way you will be safe not to bring in a lower return.

At the end of every year, in case of Guaranteed annual payouts, the return benefits are paid. In the last 3 or 5 years of the policy, depending on the policy term chosen by the policyholder at the time of buying the policy, the payout benefits are paid. At the time of maturity, the policyholder gets a terminal bonus and a reversionary bonus.

The policy holder’s family receives the death benefit in case of unfortunate death of the policyholder, to fulfill their future financial needs. If the policyholder dies during the premium paying term, the nominee gets the basic sum assured along with bonuses if any, as the death benefit. These payouts are carried for as long as mentioned in the policy.

In case the policyholder dies after the premium paying period, the nominee will receive the sum assured and the lump sum of payout of whatever is left in the policyholder’s account.

After the death of the policyholder, the policyholders family need not pay any future premiums, while the policy still continues, with its benefits intact. Guaranteed additions accrued to the policy, are also paid at the time of maturity. And on the scheduled dates, the nominee gets the guaranteed annual payouts and eligible bonuses, if any.

Guaranteed income plans offer income tax deduction under Section 80(C) every year. Also, tax exemption under Section 10(10D) is available on the maturity proceeds.

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