A Guaranteed Income Plan is an insurance product that provides you with insurance cover along with a guaranteed income during a set duration. These plans offer a steady stream of income to an individual, typically in the form of regular payments.
Guaranteed Income Plans are often used as a retirement tool, as it can provide a reliable source of income during one's golden years. However, guaranteed income plans can also be used for other purposes, such as providing financial security during periods of unemployment or supporting a person through a disability.
Benefits of a Guaranteed Income Plan
A guaranteed investment plan empowers you to decide how long and at what time you want your income payouts to be. For example, for 10 years annually or for 8 years quarterly, or even as a lumpsum income. There are several benefits to having a guaranteed income plan, which can make it an attractive option for people looking to secure their financial future. Some of the key benefits include:
- Financial security: One of the biggest benefits of a guaranteed income plan is the financial security it provides. With a steady stream of income coming in, individuals can feel more secure knowing that they have a reliable source of funds to cover their basic needs. This can be especially important for those who are retired or unable to work due to disability, as they may not have the same level of income coming in as they did during their working years.
- Life Cover: In addition to providing financial security, a guaranteed income plan with life cover can also provide peace of mind knowing that your family will be protected in the event of your death. This can be especially important for those who are the primary breadwinners in their household, as their death could have a significant impact on the financial stability of their loved ones.
- Flexibility: Depending on the type of guaranteed income plan you choose; you may have the option to customize the payments to suit your specific needs. For example, you may be able to choose the frequency of the payments (e.g. monthly, quarterly, etc.), the amount of the payments, or the length of the term. This can be helpful for individuals who have specific financial goals or who need to tailor their income to fit their budget.
- Potential for tax savings: Some guaranteed income plans may offer tax benefits, which can help individuals save money on their taxes. For example, with a guaranteed income plan, you can save up to ₹1.5 lakhs on premiums paid under section 80C of the Income Tax Act, 1961. Also, the income received under the plan is exempted from tax under section 10(10D). This can help you to save money on your taxes in the short term, and potentially earn more on their investments over the long term.
- Family Income Benefits: A few Guaranteed Income plans offer this benefit to ensure that in case of an unfortunate death or diagnosis of covered Critical Illness, you and your loved ones don’t have to compromise on your dreams as you/they will continue to receive benefit.
- Potential for legacy planning: Depending on the type of guaranteed income plan you choose; you may also be able to use it for legacy planning purposes. For example, you may be able to name a beneficiary to receive the payments after your death, or you may be able to use the plan to leave a financial gift to a loved one.
How does a Guaranteed Income Plan Work?
A guaranteed income plan is a financial product that provides a steady stream of income to an individual, typically in the form of regular payments. These payments are guaranteed, meaning that they will be made regardless of market performance or fluctuations.
There are different types of guaranteed income plans available, each with its own unique features and benefits. To secure your future with a guaranteed income plan, you will need to follow a few steps.
- First, you have to choose the premium you wish to pay, as well as the plan option, premium paying term, premium paying frequency, and policy term.
- You may also have the option to choose a family income benefit and may be able to add additional riders to enhance your protection. Riders are additional benefits available with different plans at an additional cost.
- Once these details have been determined, the sum assured on death and sum assured on maturity will be calculated based on these inputs, as well as your age, gender, and income.
Overall, a guaranteed income plan can provide financial security and peace of mind by offering a reliable source of income and protection for an individual and their family.
Swati Tumar - Travel & Finance Writer
Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.