A guaranteed return plan is a smart savings option for individuals and their families. It offers stable returns and ensures that both your and your family’s financial goals are met without difficulty, even during tough times. This plan helps manage expenses while providing financial security for your loved ones in case of the policyholder’s unexpected passing.
Now, let us explore if guaranteed return investment plans are a good choice for wealth creation.
9 Reasons Why Guaranteed Return Investment Plans are a Good Choice for Wealth Creation
Guaranteed return investment plans offer several benefits that make them a strong option for wealth creation, particularly for those seeking stability and security in their financial planning.
- Financial Security for Your Family
Life is full of uncertainties and the death of the main breadwinner for any reason is one of such uncertainties that cannot be avoided. A guaranteed life insurance plan is a financial safety net for your loved ones in such circumstances to avoid hardship and keep their quality of life intact.
- Protection of Your Assets
If ever you need to borrow money to cater to your needs, a guaranteed return plan can help your family avoid the stress of paying for the loan in the event of your demise. This policy allows your family to pay off any remaining bills without jeopardising your home or car.
- Tax Savings
The most attractive benefit of investing in a guaranteed return plan is the aspect of taxes. The premiums you pay can be an allowance from your taxable income based on the Income Tax Act of 1961, specifically the section 80C and 10(10D). However, it is important to remember that tax regulations can change over time.
- Flexible Payment Options
Guaranteed return plans offer flexibility in how you pay your premiums. You can opt to pay monthly, quarterly, or yearly, depending on the most convenient package for you.
- Additional Rider Benefits
These plans also include optional rider benefits, such as accidental death cover or hospital cash, so you can expand your protection. Some of these riders are not mandatory but are added at an extra cost and provide additional financial coverage.
- Death Benefit
In the event of the policyholder’s death during the policy term, the nominee receives the death benefit along with any bonuses that may have accumulated. For instance, if a person passes away midway through the policy term, their beneficiary will receive both the base coverage and any additional bonuses that may apply, providing extended financial support for years to come.
- Simplicity and Easy Access
Guaranteed return plans are generally simple to understand and easy to purchase. With minimal paperwork and straightforward terms, these plans are accessible to many investors, including those new to investing. Online purchase options also provide transparency, with no hidden charges, making the process hassle-free.
- Diversification and Risk Management
Including a guaranteed return plan in your investment portfolio can help diversify and reduce risk. While investing across different asset classes is essential, having a guaranteed return plan adds stability to your portfolio, balancing out riskier investments.
- Tax Benefits on Investment and Returns
When you invest in a guaranteed return plan, you can claim tax deductions under Section 80C, with a maximum limit of ₹1.5 lakhs. This reduces your taxable income, offering significant tax savings.
Additionally, the returns or maturity amounts you receive from the plan are exempt from taxes under Section 10(10D). However, as of March 31, 2023, plans with an annual premium above ₹5 lakhs will be taxed based on the prevailing tax slabs.
What are Included in Guaranteed Return Investment Plans?
The following are the inclusions of this type of investment plan:
- Natural Death Benefit: Provides a death benefit if the insured passes away due to any cause, including accidents, injuries, or illnesses, ensuring financial support for the beneficiary.
- Critical Illness Benefit: Offers coverage for critical illnesses, helping manage substantial medical expenses associated with severe health conditions.
- Accidental Death Benefit: Delivers a lump sum payment if the insured’s death results from an accident, adding an extra layer of financial security.
- Loan Benefit: Allows policyholders to access loans against the policy, offering flexibility by providing up to 70-90% of the policy’s surrender value.
What are Excluded in Guaranteed Return Investment Plans?
The following are the exclusions of guaranteed return investment plan:
- Suicide Clause: If the insured commits suicide within the first year of the policy, the insurer refunds the premiums paid. For suicides within a year of a lapsed policy being revived, the plan may offer 80% of the premiums or the surrender value, whichever is higher.
- Adventure Sports and Risky Activities: It excludes coverage for deaths resulting from participation in high-risk activities and adventure sports, focusing on more predictable risks.
Who Can Buy Guaranteed Return Investment Plans?
Guaranteed Return Plans are accessible to a wide range of individuals, but they are particularly suited for the following groups:
- Individuals Seeking Financial SecurityÂ
Those looking for a secure investment that guarantees returns and offers protection against unforeseen events will find these plans appealing. They provide peace of mind by ensuring that your financial goals are met, even in challenging times.
- Parents Planning for Their Children’s FutureÂ
Parents who want to ensure a solid financial foundation for their children’s education, higher studies, or other significant expenses can benefit from these plans. They offer a way to build a corpus for future needs.
- Young ProfessionalsÂ
Those at the beginning of their careers can take advantage of these plans to establish a strong financial base. Early investment allows for longer-term growth and compounding benefits, setting the stage for future financial success.
- NewlywedsÂ
Couples who are starting a new chapter together can use these plans to achieve their joint financial goals. Whether it is buying a home, starting a family, or planning for future milestones, these plans provide a structured approach to saving and investing.
- Working WomenÂ
Women managing multiple roles and responsibilities can rely on Guaranteed Return Investment Plans to maintain financial stability. These plans offer a balance of growth and protection, supporting financial independence and achieving personal goals.
- Taxpayers Looking for Tax BenefitsÂ
Individuals seeking tax advantages can also benefit from these plans. The premiums paid are eligible for tax deductions under Section 80C, and the returns are tax-exempt under Section 10(10D), making them a tax-efficient investment option.
Thus, guaranteed return plans offer a secure and stable way to create wealth, particularly for those looking for predictable returns and protection for their loved ones. While the returns may be lower than market-linked investments, the peace of mind and financial security they offer make them worthwhile in any long-term financial plan.
Also Read: Buildings Insurance for Flats with Freehold: How to Protect Your Investment Like a Pro
