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Why You Should Consider Buying a Guaranteed Life Insurance Plan?

The life insurance plans stand as massive support to a family during any kind of emergency. Financial support is something that every individual looks forward to at the time of crisis, and a life insurance plan certainly provides one.

 Most of the insurance covers the death risk of an individual at low premiums. Often returns on maturity are also not offered in such plans. The guaranteed life insurance plan came into the picture when there was a need for a plan that provides coverage at every stage of life. 

The guaranteed life insurance plan is also referred to as a traditional life insurance plan. Anyone falling between the age group of 50 to 80 years of age can easily avail this plan. However, the policy term may vary from plan to plan.  Let us get into the nitty-gritty of a guaranteed life insurance plan.

What is a Guaranteed Life Insurance Plan?

Guaranteed life insurance plans offer a guaranteed benefit payout either in case of death or maturity of the plan. It is a whole life insurance policy that doesn’t ask for any medical records. No health-related questions are to be answered, or no medical exam has to be taken by the insurance buyer.

It makes an individual understand the importance of financial stability in life. The benefits of maturity returns and regular guaranteed payouts cater to the requirements of risk-taking insurance investors.

What are the Types of Traditional Insurance Plans?

The following are the different types of guaranteed life insurance plans having different top-notch features designed to cater to the needs of the individuals:

  • Whole Life Insurance: This plan holds a guarantee for the entire lifetime of the insurance buyer.
  • Money-back Policies: In this plan, insured is paid in instalments after maturity of this policy and provides life coverage during the policy term.

  • Endowment Plans: It is a combination of both insurance and investment policy. Here the insured is provided with add on bonus on the maturity of the policy along with the returns or the death of the insurance buyer.

What are the Features of the Guaranteed Life Insurance Plan?

One of the key highlights of buying a guaranteed life insurance plan is that no medical certificate is to be provided when buying the plan.   Listed below are some of the features that are offered within the plan:

  • The plan offers guaranteed benefits, which make it ideal for those who are in constant search of assured returns.

  • It offers regular income for varying from 10-30 years.

  • A bonus would be provided if any at the time of the maturity and also offers the benefit of tax exemption.

  • It inculcates a saving habit in the insured by paying a premium for a longer tenure as compared to any other life insurance plans.

  • When an individual is about to retire, that person might want to save in such a plan and not take any further risk.

  • The guaranteed life insurance plans provide more protection when compared to Unit Linked Insurance Plans.
  • An individual can select certain optional riders. These riders help the insured to enhance the coverage provided under this plan.

  • When compared to other plans it has negligible risks due to the investments in the fixed-income securities.

How is a Guaranteed Life Insurance Plan Different From Other Plans?

On the following parameters the individual can decide between buying the guaranteed life insurance plan:

  • Term Period: The guaranteed life insurance plans offer coverage and guaranteed return for ten years and can be extended for a lifetime.

  • Investment: In this policy, the premium amount differs from plan to plan and depends on various factors like age, policy value, medical conditions, etc. An individual can avail investment returns as the maturity benefits.

  • Guaranteed Return: A regular flow of income so that the monthly expenses can be managed and maintain financial stability in an everyday life.

  • Withdrawal: A withdrawal can be made after the completion of the policy lock-in period of 3 years.

  • Taxation: Under section 80C and 10(10D) of income tax act 1961 a tax reduction benefit. 

Who Should Choose a Guaranteed Life Insurance Plan?

Under the following circumstances an individual should choose the guaranteed life insurance plan:

  • When looking forward to long-term financial stability with low risk.
  • Coverage of risks and guaranteed returns upon the payment of the premiums of the plan.

  • Regular cash flow for important milestones such as education of the child, marriage, and so forth.

  • Saving the tax on the investments.

Factors to be Considered While Buying the Guaranteed Life Insurance Plan?

The following are some of the factors to be considered while buying the plan so that the needs of the individual can be met, and used beneficially: 

  • Cover Amount: The age, financial responsibilities, future financial requirements, and loans, basic living expenses should be considered to understand the amount of coverage you need, and then the cover amount can be stated. The grid below shows the cover amount that should be ideally established:

    Younger community Higher cover amount
    People between 25-30 years The cover should be 15 times the annual income
    People between 45-55 years The cover should be 10 times the annual income
  • The Policy Period: It is important to determine the policy period depending on the insurance buyers age and plans to retire after how many years.
  • Payout Options: An individual can choose a lump sum payout or a lump sum payout alternative with constant monthly income, whatever suits the insured.
  • The Right Insurer: Selecting the right insurance company depending on its claim settlement ratio, solvency ratio as it highly indicated the strength of the insurer financially; short-term and long-term liabilities are to be taken care of by the insurer.
  • Goodwill: Market reputation is one such factor, which is the easiest but also the most mixed area where people have a different opinion about the insurer so a buyer should always consider the reputation of the insurer in the market as it would be unbiased.

Is Guaranteed Life Insurance Plan Worth It?

The guaranteed life insurance plans are of two types that are participatory and non-participatory. When it comes to a non-participatory plan instead of a bonus it gives out guaranteed benefits that may vary on account of the profit made by the insurers. The guaranteed benefits essentially act as a proposition for any individuals who wish to obtain assured returns upon the savings.

The insured has to pay the premium for a specified number of years and obtain guaranteed payouts for the remainder of the tenure of the policy. The guaranteed benefits are accrued upon maturity and mostly these plans offer the death benefit, which is the highest alternative amidst the sum assured.

The plans also give the equivalent rate of return specifically when it is about disbursal of the payouts. Some plans have a structure that is similar to that of a money-back plan; however, the other plans might pay a lump sum at the policy’s maturity date.

The guaranteed life insurance plans are ideal for those who prefer stability over the volatility and are looking forward to seeing a fixed sum is credited to the account in the bank after some time.

How to Apply for the Guaranteed Life Insurance Plan?

Applying for a guaranteed life insurance plan can be done online by submitting the documents on the insurance company’s website or visiting the nearby branch. Listed below are the documents that will be required while buying the plan:

  • Income documents, which consists of the salary slips of the last three months, income tax returns the certificate, latest six months generated bank statement.
  • Address proof.

  • ID proof.

  • Filled proposal form.

The Bottom Line

Guaranteed life insurance plans offer the dual benefit of coverage during the lifetime and the benefit of investment simultaneously. Considering guaranteed life insurance plans will lead an individual to avoid a potential threat to the financial stability of an individual, along with providing regular income.

The guaranteed life insurance plan is worth considering when expenses such as outstanding debts, funeral costs, need not be passed to the family members. . The guaranteed life insurance plan surely helps a person in the long run.


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