Guaranteed income plan in life insurance: The premium to be paid in a term plan is lower. However, as the savings component is involved, you have to pay a very high premium in a guaranteed income scheme.
A life insurance guaranteed income plan comes with a predefined schedule and a specified amount that is paid out to the policyholder. Income from this scheme can be paid to the insured on a monthly, quarterly, half-yearly or annual basis.
Unlike term insurance, which only provided coverage until the expiration of the term or years for which the policy was purchased, the guaranteed income plan provides a fixed amount for a specified period after maturity. of the font.
The amount of income provided under the guaranteed income scheme is fixed and calculated either as a percentage of the sum insured or based on the annualized premium.
The premium paid under the term plan is lower. However, as the savings component is involved, you have to pay a very high premium in a guaranteed income scheme. Before purchasing a guaranteed income plan, one must first ascertain his purpose for purchasing the insurance policy.
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According to Aatur Thakkar, co-founder and director of Alliance Insurance Brokers, one should buy guaranteed plans if fixed and assured returns are preferred over low returns.
“These plans offer capital protection and stable returns. Life insurance coverage provides financial security for the family and a guaranteed insurance plan also helps clients to a large extent remove the uncertainty of future income streams,” Thakkar told FE Online.
What the Rs 1 crore blanket costs
There are many factors on which the actual returns under a guaranteed income plan depend. These could be age, premium term and amount, and internal rate of return (IRR) in most traditional plans, including reimbursement and endowment, Thakkar said.
Each insurer has its structure of guaranteed plans and the guaranteed returns are based either on premiums or on the sum insured.
While choosing the right plan, one must also fully understand the payment structure.
“Guaranteed plans with or without fixed returns are very expensive. For example, if a normal term plan costs you Rs 15000 per year for Rs 1 Crore coverage, on the other hand, guaranteed returns plans will cost you around approx. Annual premium of Rs 3.5 lakhs to Rs 4 Lakh,” Thakkar said.
“Returns from a guaranteed plan will earn no more than 6% to 8%,” he added.
If the purpose of purchasing insurance is financial protection for the family in the event of the unexpected death of the insured, a term plan should be purchased. As the premium is low. Also, one can invest in better financial products for high returns.
“As an advisor, we always suggest buying pure term insurance which will still help you get coverage for your loved ones while you’re away, and then at the same time invest the remaining premium amount somewhere that will earn you better returns. “said Thakkar.