Guaranteed Life Insurance Plan: Should You Opt for It?
With the political and economic problems around the world, there has been a rise in global inflation. These uncertainties have made it more essential than ever to have financial instruments that secure your life. One way to secure the life of your loved ones and safeguard them from uncertainties is by buying life insurance.
The meaning of life insurance is simple, in case of the demise of a policyholder, their nominee receives the death benefit. The death benefit ensures that in the absence of the policyholder, their family does not face any financial problems. There are several types of life insurance, each having distinct benefits to offer. One of the popular choices to buy would be a guaranteed regular income plan. With it, in a single plan, you get a life insurance and also fixed savings. Read further to understand what a guaranteed income plan is and whether should you buy it or not.
What is a guaranteed income plan?
A guaranteed income plan is a type of life insurance that also provides guaranteed returns in the form of a regular income. With the life insurance component of the plan, you are relieved that in case of an unfortunate circumstance where you lose your life, the financial health of your loved ones is secure. The saving component ensures that you receive a regular income for a defined period as mentioned in the policy.
Why should you buy guaranteed income plans?
Here are some prominent features of guaranteed income plans which will give you further clarity on whether they can meet your needs or not:
- Offers dual benefit
A guaranteed income plan has much more to offer than a traditional life insurance plan. It secures your life and allows you to save some funds alongside. You can use a life insurance calculator to align your plan with your financial goals. There are also riders which you can add to multiply your benefits. Riders are add-on benefits that you can choose by paying additional premiums.
- Provides guaranteed income
When you are creating your financial plan, you want a blend of savings and investments. You want some instruments in your portfolio that are high-risk, high reward, and others which offer guaranteed income. A guaranteed income plan exactly does the latter. You can be relieved that you are going to get a fixed income for a fixed duration as per your policy. You do not have to monitor any markets and worry about the uncertainties. Having a fixed plan is a financial cushion that you can rely on whenever you need funds.
- Inculcates a saving habit
When you get your paycheck, you already have several financial commitments upfront to take care of. It is easy to get swayed by the existing expenses and procrastinate on your savings. In your initial working years, it is especially difficult to put money aside and save as there is no immediate sense of urgency. However, most individuals regret not saving or investing early on in their lives. With a guaranteed income plan, you get a savings plan along with life insurance. It ensures that you save over the years and when your policy matures, you get the desired benefits.
- Offers tax benefits
The meaning of life insurance for most individuals, apart from getting a life cover, is having a tax-saving instrument. The reason they think so is that life insurance plans offer several tax benefits. With your guaranteed income plan, the premiums that you pay are subjected to deductions under Section 80C of the Income Tax Act. The payouts of the plan are also subjected to exemptions provided certain conditions are met as per Section 10(10D) of the Income Tax Act.
- Enables long-term wealth creation
When you are buying a guaranteed income plan, you are buying life insurance which is usually for the long haul. When you pay premiums and a part of the premium is being saved, over the years you create a sufficient corpus. A sufficient amount of funds allows you to achieve your long-term financial goals. When you are buying the plan, if you have some goal in mind regarding your savings, you can plan accordingly. Use a life insurance calculator to find the amount you need to save for your goal.
There are several features that a guaranteed income plan offers which make it a cut above the other types of life insurance. If your needs are aligned with the features mentioned above, you should buy one.