What are guaranteed Return plans

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With more and more insurance companies coming out with Guaranteed return plans they are the next happening product in the insurance industry after ULIPS.

What are guaranteed Return Endowment plans?

They are the form of endowment plans which offer a guaranteed return over a short to medium term (5 – 10 years).

They differ from endowment plan in term of short term as well as guaranteed return and flexible and low surrender terms.

Main highlight of such policies are

  • Guaranteed return.
  • Insurance cover.
  • Short to medium term.
  • Tax benefit on both premium paid and maturity amount.

Benefit of GR plans over traditional tax saving FD, NSC, and PPF which also offer guaranteed return.

Comparing Guaranteed return plans with NSC, PPF, Tax saver FD.

PPF

NSC

FD

GR plans

Guaranteed return

Yes

Yes

Yes

yes

Term

15 years

6 years

5 years

5-10 years

Tax benefit

Yes

Yes

Yes

Yes

Interest earned tax free?

Yes

No

No

Yes

Insurance

No

No

No

Yes

Liquidity

Partial withdrawal after 5th year

Can be encased only on maturity

Can be encased only on maturity.

Surrender is allowed after 1st year.

Overall return on the GR plans turns out to be much higher compared to NSC and FD as interest earned or the maturity benefit is tax free.

It scores over PPF in term of flexible terms and flexible surrender options.

GR plans allow surrender as early from 1st year, while in PPF partial withdrawal can be done only after 5th year.

The other important benefit of these plans is the risk cover they provide which none of the above discussed product provides.

Only negative side of these plans is high single premium.

It starts from Rs. 25, 0000 compared to Rs. 100 in NSC.

E.g. of Guaranteed return plans.

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