What is Guaranteed Income Insurance Plan?
Why Guaranteed Income Insurance Plan?
Alternate source of income
Why are you recommending a guaranteed income plan over mutual fund?
We use GIP as an alternative to the Mutual Fund Bond Portfolio, not entirely but a portion of it.
India is a developing economy and as the country develops it is noted that the interest rates keep moving downwards. All developed economies have very low-interest rates.
By using this product we are able to lock in a high tax-free return of 5.5% to 7% per annum for the next 20 years thereabout.
What is customizes GIP?
This is a non-participating life insurance plan where the insurance company guarantees returns over the life of the product. The approximate returns range from 5.50% to 7% per annum. The best part is that the returns get locked in for almost 20 years.
Is there any risk associated with guaranteed income plan?
- There is no risk associated with Guaranteed Income Product.
- The return is clearly mentioned in the Insurance Policy copy. Theoretically, if the interest rate goes up in India then the investor is exposed to the re-investment risk (i.e.- the investment gets locked in at a lower interest rate).
- However, this has a very remote possibility as the guaranteed income products are generally for a very long period.
- Over such a long period it would be difficult to hold a very high-interest rate for a fast-developing economy like India.
- Monthly income tax-free After paying the premiums, the policyholder will receive monthly income payouts that are tax-free for a definite period! This income is exempt from tax under the Income Tax Act of 1961.
- Guaranteed income doubled In most guaranteed income plans, the payout period is divided into two parts. In the first part, the assured income is paid monthly to the policyholder. Upon completion of the first half of the tenure, the monthly income is doubled.
- Payouts are immediate With a guaranteed income plan, you don't have to wait years for your premiums to be paid. Once your tenure is complete, you can begin receiving the assured sum as a monthly payout.
- Protected by guarantee The monthly income scheme comes with guaranteed death benefits. The nominee will have the option to receive the death benefits as a lump-sum amount if the insurer dies during the tenure of the plan. After the insurer's death, the nominee can also receive this income for ten years.
- Options for flexible payouts For emergencies, you can receive the payout after the maturation of the monthly income as a lump sum.
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