Guaranteed insurance plan: Things to consider before investing

• Follow

Guaranteed insurance plans is a type of life insurance policy. These insurance plans offer guaranteed payout at the time of buying the policy, which remains the same throughout the tenure of the policy. The payout can be either in the form of a lump sum or regular income for a certain number of years. When fixed deposit interest rates are at a record low, these insurance plans have become hugely popular in recent times.

Here are various options offered under guaranteed insurance plans:

Maturity benefit

These plans offer a guaranteed amount on maturity as lumpsum at the end of the policy term provided all premiums are paid and the life assured survives the policy term.

Regular income

This option pays a guaranteed income for a certain number of pre-determined years ranging from 10 years to 20 years. These are deferred plans where a policyholder first pays a premium for a certain number of years after which payout in the form of guaranteed income starts after the completion of the policy term.

Long-term payouts

Under this option, a guaranteed income is for a longer duration of time ranging from 25-30 years. For the longer-term policy, many insurers also return the total premium paid at the end of the payout period. Here the policy year can be 10-15 years for the premium paying term of 5 to 12 years. For example, if the premium paying term (PPT) is 12 years and policy term of 13 years then the guaranteed income is paid from the 14th year for continuous 25 years.

Lifelong payouts

There are some guaranteed plans that give you an option to earn guaranteed income up to the age of 99 years with a return of premium on maturity. Here the minimum age requirement can be higher at 50-60 years as the product is suitable for people closer to their retirement.

If you want to invest in a guaranteed plan, invest in the option according to the goals in life and the stage of life you are in.