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Guaranteed Income Plans

These are non-participating traditional insurance plans. As traditional policies go, these plans do not disclose costs or investments. But since the investment benefits in these plans are not linked to the performance of the underlying fund, in insurance parlance this is referred to as non-participating, they are required to guarantee investment benefits upfront. A guaranteed insurance plan is attractive not only for the buyer but also for the seller. “A non-participating insurance policy is generally more capital-efficient because insurers can retain the entire profit from the portfolio. By guaranteeing small benefits upfront the insurer is able to reduce capital strain,” says Mehta. The way these policies work is like this. Depending upon your age and the sum assured or insurance cover chosen, you pay an annual premium for a certain number of years. This is also called the premium payment tenor (PPT). After PPT is over, the policy starts giving a regular guaranteed payout for a certain number of years. This can also be called the payout tenor. At the end of the term the policy would usually give the sum assured or a percentage of that sum assured and the policy would terminate. The premium payment term and the payout term together make the policy term. The insurance cover in this policy is valid throughout the policy term.