Guaranteed Life Insurance Savings Plan: Should You Opt For It?

Such schemes are more suited for middle-aged policyholders who have some time on their side and who can build a corpus that can give a better payout in their later years.
Life insurance, 
life insurance saving plan, 
Life insurance, life insurance saving plan, Insurance

Do you like to play safe when it comes to investment in insurance plans? Also, are you looking to get assured returns to secure your retirement? Then you can perhaps opt for a Guaranteed Life Insurance Savings Plan. Such investments are meant for investors with a long-term horizon and low-risk appetite. Then you may want to opt for a guaranteed life insurance savings plan. A Guaranteed Plan is a non-linked, non-participating life insurance savings plan that offers guaranteed benefits while giving you the freedom to customize your benefits to suit your preferences. Whether you opt for payouts as long-term income, a one-time lump sum, or periodic lump sums, these plans allow you to create an approach that aligns with your financial objectives. 

According to experts, by opting for solutions tailored to your financial needs, you not only secure guaranteed benefits but also ensure long-term security and peace of mind in the long run. Additionally, you can choose the survival benefit durations to tailor the plan according to your circumstances. An important benefit of these plans is their adaptability, allowing you to make adjustments, as necessary, based on changes in your situation. This flexibility enables you to maximize the advantages offered by the plan, making it a versatile and pragmatic choice for safeguarding your future. 

Also read: Life Insurance Bonus: How Does It Work And What Do You Need To Know?


“The plan celebrates your life's journey with optional survival benefits. If you're alive at the end of the policy term and your policy is active, you'll receive a payout. The specific benefit amount and payout schedule depend on the variant you choose at policy purchase. Multiple options are available to tailor your reward to your goals. It can be a lump sum benefit, an income benefit, a mix of both, or a whole-life benefit,” Ashok Manwani, vice president - of products, at Go Digit Life Insurance said.

The death benefit is an amount of money determined at the start of an insurance policy. If tragically the policyholder passes away within the policy period, this agreed-upon sum is given all at once to the chosen nominee, offering financial stability.
“For instance, Digit Icon offers an additional layer of security with its In-built accidental death benefit (ADB). If the insured dies from an accident, during the policy duration, an additional lump sum is provided to the nominee. This extra benefit aims to support family members in managing burdens that accidents may entail, helping them better navigate financial difficulties in times of crisis,” Manwani said. 
If the Life Assured passes away during the policy term, the nominee/(s) receive 100 per cent of the Sum Assured immediately. They also get any remaining Guaranteed Income and maturity benefits. No future premiums are required after the insured's death. Life Assured is the person whose life is protected under the contract of insurance policy. A Sum Assured is a fixed amount that is paid to the nominee of the plan in the unfortunate event of the policyholder’s demise. 

If the Life Assured is diagnosed with a covered critical illness, five times the annualized premium is paid as a lump sum. This benefit is separate from the death benefit. Future premiums are also waived. If the assured dies during the policy term, the nominee/(s) receive 100 per cent of the death benefit, and the policy terminates.
If the person covered by the policy passes away during the policy term, the chosen nominee(s) will receive the death benefit promptly. Moreover, they will also be given half of the Guaranteed Income that was initially meant for the policyholder. This payout will be ongoing, for either the remaining income period or up to 10 years, whichever period is longer.
At the age of 60, if you are diagnosed with a critical illness, you receive a lump sum payment equivalent to five times your annual premium. However, this lump sum payment will lower the amount of money that will be paid to your beneficiaries upon your death. Despite this, you are still required to pay your regular premiums. On the bright side, your guaranteed monthly income payments increase by five per cent to offer you additional financial support. If the insured passes away at a later point, your family or chosen beneficiaries will receive the remaining death benefit.

Drawbacks: However, Guaranteed Plans come with their drawbacks. First, the coverage amount is lower than the regular term insurance plans. Second, they are typically more expensive than regular term insurance plans due to their inherent risk. Third, there is an initial waiting period. The beneficiary will not receive the death benefit if the policyholder dies during the waiting period. Also, these plans offer a 10 per cent return on the sum assured and not the actual money invested. However, this is misleading. And according to experts, it’s not profitable either as the actual money invested could be much higher than the Sum Assured. 

“Often the way the Guaranteed Plans are marketed and sold is misleading. It might look attractive on the outside, but there are several complexities if you probe deep into it. And the most important factor is the payout structure. The terms and conditions of the plan can be so complex, that an average person might not comprehend it properly, and hence end up making a wrong decision,” AK Narayan, CEO, of AK Narayan Associates, a financial planning firm said. 

Related Stories

No stories found.
Outlook Business & Money