Financial security has become paramount in current times, especially in the face of ever-growing inflation. To achieve this financial security, there is a need for a comprehensive portfolio of investments so that you don’t waste the potential of your earnings. But oftentimes, professionals are risk-averse and refrain from investing in market-linked entities. This makes them vulnerable to the financial uncertainties of the day.
To cater to such risk-averse individuals and to the public, insurance companies have come up with Guaranteed Income Plans. They are a type of life insurance that guarantees fixed returns on the premiums that you pay. Through our discussion, we will take a detailed look at them and discuss what you should keep in mind before choosing the right one for yourself. Let’s begin.
WHAT ARE GUARANTEED INCOME PLANS?
Guaranteed Income Plans are life insurance products that provide fixed returns to the policyholder in addition to providing life cover for a sum assured in exchange for premiums. These returns can be in the form of monthly, quarterly, half-yearly, or annual payments. There is also the option of a lump sum payout at the end of the policy term.
These insurance plans are not market-linked, meaning that they are not dependent on market fluctuations and thus are able to provide a fixed income to the insured, as promised. There are several things you should keep in mind while buying a guaranteed income plan. Here are the top five:
CHOOSING THE RIGHT PLAN FOR YOURSELF
Just like any other financial product, Guaranteed Income Plans also have their pros and cons, and having a holistic understanding of them can help you choose the right one for yourself.
Understand the Returns
This is a crucial point to keep in mind. When you hear the word “returns”, preceded by “guaranteed”, the product might instantly seem attractive, but it is essential to understand how many returns you are eligible to get and what they will be on the schedule. It is not to suggest that Guaranteed Income Plans do not have attractive returns. Far from it, they are some of the most prudent investments that you can make but bear in mind that the returns come to you after a certain period of time, and the percentage of the returns also depends on external factors like the policy tenure and the premium amount.
Choose the Right Policy Tenure
Choosing the right policy tenure is a crucial part of any investment you make. Time is an essential factor when you are talking about return on investments; the longer you are invested, the more you stand to gain. The same is true for Guaranteed Income Plans. But you might not always need long-term investment. Your needs might be short-term, so that you can decide accordingly. Your insurance needs might be short-term, in which case a shorter policy tenure might be suitable.
Choose the Right Plan Structure
In the case of guaranteed income plans, the plan structure matters a lot. Generally, you get the returns at the end of a particular period, and you can decide on that period at the beginning. Again, it can be determined based on your needs. Companies like Edelweiss Tokio Life Insurance offer up to four different structures of the same plan so that you can get the one that precisely aligns with your goals. Their Edelweiss Tokio Life – Premier Guaranteed Income plan is worth checking out for the wide variety of plan structures it offers!
Don’t Miss Out on Riders
Riders are add-ons that can make your policy even more comprehensive. Some of the standard riders available are:
- Accidental Death Benefit Rider
- Accidental Total and Permanent Disability Rider
- Critical Illness Rider
Read the Fine Print!
This goes without saying but do your due diligence before buying the policy. See the Claim Settlement Ratio of the insurance company, go through all the policy features listed in the brochure, and utilize the free look period properly!
Your intent matters! What is your goal?
This is not clear to a lot of people because financial planning is often done for a future that no one has seen. But having a specific purpose for buying any policy can make sure that your portfolio is airtight. You might want to start planning for your retirement or have a fund for your kids. The possibilities are endless. Knowing (or having an idea about) them can help you make a better decision.
How are Guaranteed Income Plans Different from ULIPs?
In the case of Unit Linked Insurance Plans, the returns on your investments are market-linked, meaning they are invested in a pool of funds made up of equity, debt, and a balance of the two. The corpus accumulated can be partially utilized after a lock-in period of 5 years, though it is not advised. Unit Linked Insurance Plans are great for long-term wealth creation but do not offer guaranteed returns, so they might not be suitable for risk-averse individuals.
Guaranteed Income Plans are ideal for such individuals who do not find investing in a ULIP a suitable choice. The truth is that both plans do share some attributes, like providing life cover and having tax benefits, but the chief difference among them is that guaranteed income plans are savings instruments, whereas ULIPs are investment vehicles.
You can visit the Edelweiss Tokio Life Insurance Website and compare their Unit Linked Insurance Plan and Guaranteed Income Plan offerings to understand the difference and make an informed choice!
Guaranteed Income Plans are a great savings option for anyone looking to secure their future financially. If chosen correctly, it can be tailored to your requirement and can transcend its generic purpose of being an insurance cum savings plan and become a specialized tool in your portfolio, aiding anything and everything that you might require to financial aid. One such comprehensive plan is Edelweiss Tokio Life Insurance’s Premiere Guaranteed Income. It is highly customizable, and you should check it out on their website today!