Best time to buy a High Value Life Insurance Plan is before 31 March, 2023!
What are Guaranteed Income Plans?
Guaranteed Income Plans fall under the product basket of life insurance plans. These plans provide both insurance coverage and a guaranteed source of income to the policyholder.
In a Guaranteed Income Plan, the policyholder makes regular premium payments and gets a guaranteed income for a predefined period of time as per the policy details at the time of purchase. If the policyholder passes away during the policy term, the plan provides a death benefit to the nominee or the policyholder's family.
Since Guaranteed Income Plans provide both insurance coverage and a guaranteed income stream, they fall under the category of life insurance plans that provide coverage as well as regular income( for the specified period). They offer the dual benefit of financial security and income, which can be useful for individuals looking to have a stable source of income in their retirement years or for their family's financial security in case of their untimely demise.
What are the benefits?
Guaranteed income plans in India offer several benefits to the policyholders. Some of the key benefits include:
- Guaranteed Income: The most significant benefit of these plans is the regular stream of income that is guaranteed for a specific period. This income can provide financial security to the policyholder and their family.
- Tax Benefits: Premiums paid towards guaranteed income plans are eligible for tax benefits under Section 80C of the Income Tax Act,1961. The income received from these plans is also taxed as per the prevailing tax laws.
- Flexibility: Guaranteed Income plans offer flexibility in terms of the premium payment frequency, payout frequency, and policy term. Policyholders can choose the plan that best suits their financial goals and needs.
- No Market Risk: Unlike other investment options such as mutual funds or stocks, Guaranteed Income Plans do not carry any market risk. The income payments are not affected by market fluctuations or other external factors.
- Death Benefit: In case of the policyholder's untimely demise, the guaranteed income plan offers a death benefit to the nominee. This can provide financial support to the family during a difficult time.
- Loan Facility: Some guaranteed income plans offer a loan facility against the policy's surrender value, providing a source of liquidity in case of financial emergency.
Who should buy?
Guaranteed Income Plans are ideal for individuals who:
- Want a fixed source of income: Guaranteed Income Plans provide a guaranteed income, which means the policyholder receives a fixed amount of money at regular intervals. This is beneficial for those who want a predictable and stable source of income to meet their daily expenses or to save for future goals.
- Want to secure their retirement: Guaranteed Income Plans are an excellent option for those who want to secure their retirement. They provide a regular income after retirement, which can be used to meet daily expenses, travel or pursue hobbies.
- Want to protect their family's financial future: Guaranteed Income Plans provide a lump sum amount to the policyholder's family in case of the policyholder's unfortunate demise. This ensures that the family's financial needs are taken care of, and they don't face any financial hardship.
- Want to save tax: These plans also provide tax benefits u/s 80C of the Income Tax Act,1961. The premium paid towards Guaranteed Income Plans can be claimed as a deduction from the taxable income, which can help reduce the tax liability.However, a recent change suggested in Budget 2023 for some of the traditional plans life insurance have put a limit to the tax-exemption provided. If the aggregate premium of you life insurance plan you are looking to buy is over Rs. 5 lacs . then you might not be able to avail tax benefit.
- Want to invest in a low-risk product: Guaranteed Income Plans are a low-risk investment option as they provide a guaranteed return. The policyholder does not has to think about the market fluctuations, making it an ideal investment option for risk-averse individuals.
- Looking to secure Retirement- Guaranteed Income Plans are a great option for individuals looking to secure their retirement. They provide a regular income after retirement, which can be used to meet daily expenses, travel or pursue hobbies.
Why buy High Value Guaranteed Income Plans before 31 March 2023?
On February 1, 2023, the finance minister presented the Union Budget 2023. A significant change was made in the life insurance category. As per the announcement, the Returns from traditional plans issued on or after 01-04-2023 (other than ULIPs) will be taxable if the premium from one or more policies exceed Rs. 5 Lacs. The death benefit, however, from such plans will continue to be tax-free.
Guaranteed Plans are a great option where life cover as well as regular income is the primary goal. A high value Guaranteed Income Plan bought before 31 March, 2023 would reap the highest benefit with maximum tax-exemption allowed.
