[Financial products can be risky. Readers are requested to do their due diligence before investing their money.]
Guaranteed return plans are products that insure and invest to yield a fixed interest rate for the money invested for a certain time. They offer two benefits: life insurance coverage and a sum guaranteed at maturity that doesn’t fluctuate due to markets.
These can be a choice for a risk-averse investor looking for stable returns and financial security of life insurance for their family. So, let’s learn more about guaranteed return plans, how they work, the reasons to opt for one, and the benefits they provide.
Workings of a Guaranteed Return Plan
While guaranteed returns are an attraction, it is necessary to understand the plan’s holistic cost to make a decision. Guaranteed return plans work quite simply on the following principle:
- Premium Payment: You invest a fixed sum for a specified term at regular intervals.
- Two-Fold Benefit: A portion of your premium is allocated for life insurance coverage, ensuring financial protection for your loved ones in the event of your passing.
- Guaranteed Returns: The remaining premium is set aside and earns interest at a declared rate, regardless of market fluctuations.
- Maturity Advantages: At the end of the policy term, you receive the accumulated amount, along with guaranteed returns, which can be taken either as a lump sum or as regular income.
In essence, these plans combine protection with investment, catering to those who seek stability and require long-term financial planning.
Reasons to Invest in a Guaranteed Return Plan
People invest in guaranteed return plans for many reasons, including:
- Risk Aversion: Such plans provide insulation against market volatility by guaranteeing a return irrespective of market conditions.
- Financial Security: They offer the dual benefits of life insurance coverage and a guaranteed corpus at maturity, bringing financial stability to the investor and his family.
- Long-term Goals: Such plans are best for long-term financial goals like retirement planning, a child’s education, or marriage.
- Tax Benefits: Premiums paid towards such guaranteed return plans are eligible for tax deductions under the prevailing tax laws of most countries, making them tax-efficient investments.
- Simplicity: Guaranteed returns are an easily understandable concept, so it reaches a large base of investors.
- Peace of Mind: Knowing that your money is safe and will grow at a fixed rate can give you much peace of mind.
However, it is imperative to compare different plans in terms of guaranteed return rates, premium amounts, and policy terms with one another before concluding.
Advantages of Guaranteed Return Plans
A guaranteed return insurance plan offers many advantages. These are explained below:
- Guaranteed Returns: These plans offer guaranteed returns unaffected by market fluctuations, providing financial stability and predictability.
- Life Insurance Coverage: Most plans include life insurance coverage, ensuring that your family is financially protected in the event of the unforeseen. Additionally, premiums paid towards such guaranteed return plans are often eligible for tax deductions in many countries, making them highly tax-efficient investment options.
- Long-term Financial Goals: This is the best possible plan through which one can make long-term financial goals relative to retirement planning, a child’s education, or marriage. It provides a low-risk investment alternative as compared to a risk-averse investor.
- Simplicity: The concept is simple and easily understood by any investor. When choosing a plan, compare the guaranteed return rates against the premium paid, including the terms and conditions of the policy.
Guaranteed return plans can be a good investment thanks to their flexibility and risk mitigation. They can be attractive for those who’re looking to achieve the nature of returns they provide. The above section should give you useful insight into how they work and why they might benefit you.