Guaranteed Income Plans are generally designed for salaried individuals who fall within the minimum age category of eighteen-60 years and the policy term for such people extends from ten years to thirty years. However, benefits of Guaranteed Income Plans are available only to the policy holder and not to the beneficiaries. At the end of the policy tenure, when the life covered is deceased, the remaining life insured gets the terminal bonus as well as simple reversion bonus and the other additional bonus benefits at the end of the policy tenure are subject to the terms and conditions of the insurance company. It is very important to understand that the basic concept of Guaranteed Income Plans is not new; however recent developments in the field have only simplified the entire process of implementation.
All Guaranteed Income Plans provide guaranteed returns at the end of the term based on the original premiums paid. The key feature of Guaranteed Income Plans is the reversionary bonus which is provided to the holder, on the death of the policy holder. The reversionary Bonus depends on the maturity of the remaining life insurance policy. As the maturity date is pre-determined in the contract, the amount of the reversion bonus is also pre-determined.
Apart from the reversionary Bonus, all Guaranteed Income Plans provide both standard and flexible options for the premium payment. The flexibility option in most Guaranteed Income Plans allows premium payment of premiums in two forms the percentage form and the cash back form. These options further divide the amount of money flowing into the insurance company’s pocket, between the premium payment and the return. This amount is known as the benefit level and is intended to yield long-term financial stability. In the case of long-term guaranteed returns, financial stability is the aim of the Guaranteed Income Plan.
The Standard Option in Guaranteed Income Plans is based on the assumption of a stable economy. In this type of Guaranteed Income Insurance Plans, the long-term level of guaranteed returns are assumed. For the purpose of determining the amount of the Guaranteed Income Insurance premium, long-term financial stability is the main concern of the insurance company. The long-term financial stability is usually determined by the yield on the equity market. Other economic factors such as interest rates are considered as well.
Most Guaranteed Income Plans offer fixed premium coverage. This implies that there is no option for the policyholder to change the level of the Guaranteed Income Insurance premium during the term of the contract. While all other life insurance plans allow for changing the level of premium payments, changing the premium levels during the contract term is not allowed in Guaranteed Income Insurance plans. Thus the only option available to the policy holder to reduce the amount of the Guaranteed Income Insurance premium is to withdraw from the contract early. Although withdrawing early from Guaranteed Income Insurance policies may result in an early exit fee, it will be the lesser of the two evils.
Since most Guaranteed Income Plans are intended to provide financial security, the policy holders are required to evaluate their financial needs annually. The evaluation of the financial needs must take into account the projected income and expenses of the individuals as well as the expected growth of their family. Most Guaranteed Income Insurance plans do not allow the policy holders to change their financial needs during the contract term. Therefore, a lot of research and planning is necessary for the individuals choosing a Guaranteed Income Insurance plan.