In todayâ€™s times, surviving on a salary is not always adequate to meet your lifeâ€™s goals. Inflation is through the roof, and the job market is going through a tough phase, where even the educated youth is struggling with unemployment. To add to this, the pandemic caused quite a stir and affected millions of people. Salary cuts became the new normal, and there were fewer and lower bonuses earned last year. In these circumstances, the need for a second income has become paramount. And this can be achieved with a guaranteed income plan or a regular income plan.
A guaranteed income plan is a unique plan that offers investment plus life insurance. On the one hand, you secure your loved ones financially in the unfortunate event of your demise. And, on the other hand, you receive a regular income from an investment that allows you to live comfortably with a supplementary income stream.
How do guaranteed income life insurance plans work?
Life insurance plans, such as a savings plan, endowment plan, money back plan, etc., enable you to invest in a single policy and enjoy dual advantages. With such plans, you can combine the benefits of investment along with insurance. This allows you to prepare for a contingency and, at the same time, invest in a low-risk environment to create more wealth.
In order to understand how income insurance plans guarantee a second income, it is important to know how these plans work.
- When you invest in investment plus life insurance plan, you are required to pay regular premiums. These premiums can be paid in a frequency as per your preference, such as monthly, quarterly, semi-annually, or annually.
- The premiums are divided into two parts – one is used to secure your life cover, and the other is invested to generate further returns.
- Thanks to the investment component of a regular income plan, your money does not lie idle and instead creates further wealth. This wealth is paid to you in the form of guaranteed income.
- With a guaranteed income plan, there are no surprises at the end of the term, and you receive your money in a lump sum or as regular income. Moreover, insurance plans, such as the Edelweiss Tokio Income Builder Plan, also offer added benefits like a critical illness rider and more.
How do life insurance plans guarantee a second income?
Life insurance plans offer a guaranteed second income in more ways than one. While you earn a regular income from an investment that adds to your wealth, these plans also help and support you financially in several other ways. Read on to know how life insurance with returns acts as a supplementary income for you:
- The guaranteed payouts can be used to cover a number of costs ranging from routine costs like electricity, gas, water, rent, etc. and long-term costs like higher education expenses, retirement costs, medical expenditure, etc.
- Income insurance plans are fairly flexible and offer you a payout in a method you like and prefer. So, you can choose to receive your income in a lump sum in case of a pressing financial need or in regular instalments if you do not have an immediate requirement of funds. You can also combine the two options and receive a part of your income in a lump sum and the other as regular monthly payments.
- Apart from the guaranteed income, an insurance savings plan also offers additional benefits, like a critical illness rider, waiver of premium, etc. With these add-ons, you can secure yourself from the costs of medical treatments, and your plan continues to run even if your ability to pay the premiums is hampered due to an illness or injury. In this regard, you do not have to pay for medical costs out of your pocket, and the plan takes care of the costs for you.
- The tax benefits offered by these plans add to your savings, further ensuring more money in your hands that can be used to cover various costs.
How to invest well in a life insurance plan for earning supplementary income?
If you want to secure your loved ones and build wealth over time, a regular income plan can offer you both. These plans are low-risk investment products that add protection to your financial planning strategies. You can safeguard your family members in your absence and benefit from the guaranteed maturity payout if you survive the term. However, it is important to pick a wholesome plan from a credible insurance company to ensure financial security. Hereâ€™s what you can do:
- Since you are investing your hard-earned money, it is important to check the trustworthiness of the insurance company. Statistics, like the claim settlement ratio, solvency ratio, etc., are some parameters that can help you choose a good insurer.
- Assess your needs and current income in order to decide the amount of supplementary income you would need in the future. This can be done on the basis of your age, income, the number of dependent family members, future requirements of your loved ones, etc. You can pick an investment amount, and sum assured accordingly.
- Pick premiums that can build a sizeable corpus over the years and, at the same time, not hamper your current lifestyle. Do not pick a very high premium that ultimately makes it hard to continue with the plan.
- Pick riders like critical illness, etc., to enjoy increased protection from your plan.
- Start early so you can generate more income over the course of time.
If you are looking for a second income, a guaranteed income plan can certainly be a good addition to your portfolio. Regular income from investment can keep you well prepared and ready for any financial emergency. Moreover, since these plans are low-risk instruments, they can fit into anyoneâ€™s requirements, regardless of their risk appetite. The flexible nature and affordable premiums make them further accessible, and the dual benefits of insurance and investment take care of multiple needs at once.