In the world of financial planning, while investors look to multiply their wealth, they also look for predictability and assurance for their future financial goals.

Guaranteed Income Plans are those financial solutions with multiple benefits, including assured returns, that can be an answer to a secured retirement planning or shielding your family financially.

Guaranteed Income Plans are the traditional insurance plans that provide the dual benefit of financial protection along with the assurance of a guaranteed income stream.

They are a safe investment option wherein you get life coverage and guaranteed regular payouts for a specified period or for a lifetime.

Isn’t it a significant relief to get an assurance that your family will be financially secure even in your absence or knowing that your retirement years would be stress-free with regular income.

Guaranteed Income Plans are designed to shield individuals from market volatility, providing a regular and stable income source during non-earning years, especially post-retirement. Their flexibility in terms of premium payment and income payout options makes them a popular choice for those seeking financial stability and peace of mind in their post-retirement years.

Here is how a basic Guaranteed Income Plan works:

• You pay a premium as per the agreed terms on amount, frequency, and tenure.
• The policy provides you life insurance coverage for the policy tenure. In case of your unfortunate demise, this amount is paid to your nominee.
• If you survive the policy term, you get the survival benefits as in your policy.
• You can also add the available riders to customise the policy as per your requirements and get an extra layer of security with enhanced benefits.

The most common features and benefits of a Guaranteed Income Plan are as follows:

1. Guaranteed Income

Guaranteed Income Plans provide a predetermined and guaranteed income benefit to the policyholder. This income is fixed, regardless of market fluctuations, hence ensuring a stable and predictable source of income.

2. Premium Payment Options

Policyholders can choose from various premium payment options, including single, limited, or regular premium plans. They can also choose different premium payment terms based on their financial preferences and capacity.

3. Payout Frequencies

Guaranteed Income Plans offer flexibility in choosing the frequency of income payouts, which can be regular or at specified periods. In some cases, you can also select your income payout in a lumpsum form, thus aligning with your needs.

Survival Benefit

Survival Benefit in guaranteed income plans is of two types: Income benefit and terminal benefit.

• Income benefit is the guaranteed regular income paid during the income period after the premium payment term ends.
• Terminal Benefit is the lumpsum amount paid on maturity after the policy term is over.

5. Death Benefit

In case of the unfortunate demise of the insured during the policy tenure, the nominee receives a death benefit that depends on the premium paid and the policy tenure chosen. The payment of death benefit can be lumpsum or in income form as chosen by the policyholder at the inception of the policy.

Some plans also provide an option of policy continuity if the death occurs during the income period. In such a case, the policy continues after the death benefit payment, and income benefits are paid as guaranteed.

Usually, the death benefit is the highest of:

• 10X of Annualised Premium
• 105% of total premiums paid.

6. Policy Continuity

Some Guaranteed Income Plans also provide a policy continuity benefit wherein if the insured passes away during the income period, the policy continues, and the nominee keeps receiving the income payouts in addition to the death benefit already paid.

7. Tax Benefits

The life insurance premium is eligible for deduction u/s 80C, and the sum received on maturity will be exempt u/s 10(10d). However, tax benefits are available subject to conditions/limits specified in prevailing tax laws.

8. Surrender Value

Guaranteed Income Plans attain a surrender value after the premium is paid for two years.

After paying the first two full-year premiums, if you cannot continue your policy for any reason, you receive a surrender value of the policy.

However, in case of single premium policies, this period is lesser, and you can surrender the policy usually after the completion of the first year.

Here, the surrender value is of two kinds: Guaranteed Surrender Value and Special Surrender Value. The policyholder is paid the higher of the two.

9. Riders for Enhanced Coverage

Riders are the additional benefits that can be attached to the base policy to enhance its coverage. They provide specific protections and can customise the plan as per the policyholder’s requirements. Critical illness rider, accidental death rider, waiver of premium rider are a few examples of such riders.

While the availability of riders may vary across insurers and specific products, some of the most common riders that might be available with guaranteed income plans are:

1. Accidental Death Rider

An accidental death benefit rider provides an additional payout if the policyholder's death occurs due to an accident. Thus, it covers the additional financial burden that an accidental death brings.

2. Critical Illness Rider

This rider offers a lump-sum payment if the policyholder is diagnosed with a covered critical illness, such as cancer, heart attack, or stroke. It can help cover medical expenses and loss of income during such critical times of illness.

3. Waiver of Premium Rider

With this rider, if the policyholder becomes unable to pay premiums due to a serious issue like disability or terminal illness, the insurance company waives future premium payments, ensuring that the policy remains in force and the guaranteed income benefit continues.

4. Income Benefit on Accidental Disability Rider

This rider provides an additional income benefit on top of the guaranteed income in the event of some unforeseen situations like the policyholder's illness or injury that impairs your earning ability and ensures that your family's financial situation remains protected even in such cases.

Before investing in a Guaranteed Income Plan, you must consider a few factors to ensure your investment aligns with your goals.

Here are 6 major factors to consider and steps to take:

1. Determine your Financial Goals

The foremost and most important step before buying a guaranteed income plan is to assess your short-and long-term financial objectives.

What are you looking for, is it about a regular income stream post-retirement, financial security for your family in case of your absence or both?

Getting a clear picture of your goals will help you choose the most suitable plan that is aligned with your requirements.

2. Check the Liquidity in your Policy

Guaranteed Income Plans usually don’t have the option of partial withdrawals. However, they start their income option after a specified period. They also provide a surrender value after the payment of a two-year premium.

You can also take a loan against these policies in case of unforeseen financial emergencies. Assess how much liquidity your plan can provide when needed and choose your plan accordingly.

3. Check the Rider Options

Riders are the additional benefits that can enhance your policy’s coverage. Evaluate your needs and consider adding relevant riders to your plan to enhance the coverage for you and your family.

4. Research About the Insurance Provider

Before finalising your investment, conduct thorough research on the insurance provider’s track record, the policy’s previous record on the percentage of returns paid, claim settlement history, solvency ratio, claim process and customer reviews.

A reliable, financially strong company, especially one that is more digital process-oriented, is more likely to honour your policy commitments hassle-free and provide excellent customer service.

5. Check for Additional Benefits like Terminal Benefits

Terminal benefits, often referred to as maturity benefits, are the payouts you receive at the end of the policy term in some policies. These are in addition to the regular income benefits already paid. Ensure you check out these benefits and compare them across different plans to make an informed choice.

6. Check for Flexibility in Premium Payment Terms

Different plans offer varying premium payment terms, such as single premium, limited premium, or regular premium options. Choose a plan that aligns with your income and financial stability. Flexibility in premium payment terms can help you manage your policy more effectively.

Whether you're planning for retirement, securing your family's future, or seeking a reliable source of income, a Guaranteed Income Plan offers you that shield against economic volatility, thus remaining your reliable companion on your journey towards a more predictable and prosperous future.