Guaranteed return insurance plans have created a niche for themselves in the savings-cum-protection products category. These plans, according to Vivek Jain-Head, investments, Policybazaar.com, not just guarantee returns for 5 or 10 years but up to a maximum of 40 – 45 years – rightly catering to the reinvestment risk.
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These non-participatory plans, Jain stresses, instead of declaring bonuses that may vary depending on the profits that insurers make offer a guaranteed return in lieu of a bonus that is much higher than the interest offered on most bank fixed deposits.
Jain further cites market reports and tells that the maximum returns that most banks are offering for a 5-year fixed deposit is between 5 percent – 5.5 percent. However, the rate of returns on guaranteed returns products, he tells, is as high as 6 percent.
"In fact, this is happening for the first time in 21-years that the rate of returns on guaranteed returns/traditional products is much higher than returns offered by bank fixed deposits," he stresses.
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Moreover, the structure of the guaranteed return plans is not the same across insurers and customers have a wide array of payout options to choose from.
The USP of the plan is that these savings-oriented life insurance plans in addition to helping one to save for long-term goals also provides life cover that is as high as up to 10 times the annual premium paid.
When planning to invest in guaranteed return plans, Jain suggests individuals to buy it online as a few guaranteed return plans sold online promise extra maturity benefit to the customers in comparison to offline products.
"For instance, say Mr X invest Rs 6 lakh in HDFC Life's Sanchay Plus over a period of 10 years. Now, if he buys this plan online, he will receive a monthly income of Rs 8,852 but if he buys the same plan offline, he will receive a monthly income of Rs. 8,594. When buying the plan online, over a period of 10 – the income payout term – Mr X receives approximately is Rs 30,940 more than offline plans which is approximately 3 percent extra income,” Jain elaborates.
Here's how guaranteed return plans of select insurers compare to FDs of key lenders:
Bank FDs
| Banks | Tenure | FD Interest Rates |
| SBI | 7 Days to 1825 Days | 2.90% - 5.40% |
| Axis Bank | 7 Days to 1825 Days | 3.25% - 5.80% |
| Bank of Baroda | 7 Days to 1825 Days | 2.90% - 5.30% |
| HDFC Bank | 7 Days to 1826 Days | 2.75% - 5.50% |
| ICICI Bank | 7 Days to 1826 Days | 2.75% - 5.50% |
| Kotak Mahindra Bank | 7 Days to 1825 Days | 2.75% - 5.25% |
| Citi Bank | 7 Days to 1096 Days | 2.75% - 4.00% |
(Source: www.policybazaar.com)
Return comparison of guaranteed return plans vs fixed deposits:
| Return Comparison | |
| Guaranteed Return Plans | Fixed Deposits |
| You invest over 6 years 10 Lakh | |
| Return You Get | |
| 6.04% | 5.40% |
| Returns After Tax | |
| 6.04% | 4.9% - 10% Tax Slab |
| 4.6% - 20% Tax Slab | |
| 4.2% - 30% Tax Slab | |
(Source: www.policybazaar.com)
Here are guaranteed return plans offered by some of the insurers:
| Insurer | Plan Name | Age | Gender | Policy Term | Pay Term | Premium (without GST) | Income Payout period | Annual Income | Total Returns | IRR |
| Aditya Birla Capital | Guaranteed Milestone Plan | 30 | Male | 20 | 10 | 60,000 | 13,94,400 | 5.51% | ||
| Bajaj Allianz Life | GIG-Lumpsum | 30 | Male | 20 | 10 | 60,000 | 14,41,294 | 5.73% | ||
| HDFC Life | Sanchay Plus-Long Term Income | 30 | Male | 11 | 10 | 60,000 | 25Yrs | 58,710 | 20,85,750 | 6.04% |
| ICICI Prudential | Guaranteed Income For Tomorrow-Income | 30 | Male | 11 | 10 | 60,000 | 10Yrs | 1,17,801 | 11,78,010 | 5.78% |
| Max Life | Smart Wealth Plan-Long Term Income | 30 | Male | 11 | 10 | 60,000 | 25Yrs | 52,656 | 19,16,400 | 5.52% |
| Edelweiss Tokio Life | GCAP | 30 | Male | 15 | 10 | 60,000 | 1,23,600 | 11,56,227 | 5.75% | |
| TATA Aia Life | Fortune Guarantee Plus-Regular Income | 30 | Male | 11 | 10 | 60,000 | 35Yrs | 54,828 | 25,18,980 | 5.91% |
| Bharti Axa Life | Guaranteed Income Pro-Long Term Income | 30 | Male | 11 | 10 | 60,000 | 25Yrs | 55,740 | 19,93,500 | 5.77% |
(Source: www.policybazaar.com)
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
(Edited by : Jomy)
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