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Tata Capital > Blog > Wealth Services > Benefits of Guaranteed Return Plan Investment

Wealth Services

Benefits of Guaranteed Return Plan Investment

Benefits of Guaranteed Return Plan Investment

Strategic investments are crucial to secure your financial future. They help you beat inflation and grow wealth. However, they often come with market risks and uncertainties. Navigating market volatility can deter individuals from making investments, especially if they are risk-averse and prefer a more conservative approach.

This is where guaranteed investment plans come in, offering a more secure and predictable alternative. In this article, we’ll dive into guaranteed investment plans and how they work so you can make informed investment decisions.

What is a guaranteed investment plan?

A guaranteed investment plan is a financial product that offers dual benefits of investment and insurance benefits. It is designed to provide a secure and predictable return on your investment while securing the financial future of your loved ones.

Unlike traditional investment plans, which are subject to market risks and fluctuations, a guaranteed investment plan ensures you receive a fixed amount at regular intervals or maturity, regardless of the market’s performance. These plans also provide life insurance coverage, which means your loved ones will receive a fixed payout in the event of your untimely demise to secure their financial well-being and maintain their lifestyle.

How does a guaranteed investment plan work?

  • A guaranteed investment plan provides dual benefits of investment growth and life insurance coverage. When you purchase a guaranteed investment plan, the premium is divided into two parts. One part is allocated towards building your investment corpus and the other part is used to provide life insurance coverage.
  • The portion of your premium allocated for investment is used to generate returns. This amount grows over the policy term, ensuring regular payouts or a guaranteed maturity amount. These returns are predetermined and not affected by market volatility.
  • However, in the event of your untimely death during the policy term, the other portion of your premium is used to provide your nominee with a sum assured, ensuring they are taken care of in your absence. This can help them fund their education, pay off debt, or maintain their lifestyle without any financial constraints.

Benefits of a guaranteed investment plan

1. Financial security

One of the most significant benefits of a guaranteed investment plan is the assurance of fixed returns. This allows you to plan your finances effectively, knowing exactly how much you will receive at the end of the policy term. Additionally, since guaranteed return plans are not affected by market volatility, they make for secure investment options for risk-averse investors seeking stable returns.

2. Life cover

Guaranteed investment plans provide life insurance coverage, ensuring your family is taken care of in the event of your untimely demise. This safety net can help them realise their dreams and manage their day-to-day expenses after they’re gone. 

3. Tax benefits

The premiums you pay towards a guaranteed investment plan are eligible for tax deductions up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. Additionally, the income received from the plan is also tax-free under Section 10(10D). This enhances the overall returns from the investment and helps you lower your tax liability.

4. Flexible premium payments

With a guaranteed investment plan, you can choose to pay the premiums monthly, quarterly, annually, or even in a single lump sum payment, based on your preference. This allows you to manage premium payments comfortably without straining your budget.

5. Portfolio diversification

Another significant benefit of investing in a guaranteed investment plan is portfolio diversification. It allows you to balance the risk associated with market-linked investments like stocks and mutual funds, providing stable returns even during a bearish market.

To sum up

A guaranteed investment plan offers a secure investment avenue for risk-averse investors seeking stable returns and financial protection. With guaranteed returns, life cover, tax benefits, flexible premium payments, and portfolio diversification, these investment plans secure you against market volatility and protect the financial well-being of your family in the event of your untimely demise.

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