Single Premium Guaranteed Returns Plan in India

In the world of financial planning and insurance, one highly effective investment solution is the Single Premium Guaranteed Return Plan. This financial instrument offers a unique blend of insurance and investment, providing you with financial security and peace of mind. Invest once and enjoy life coverage and guaranteed returns.

Let’s have a look at these plans in detail, their benefits, and how they can be a valuable addition to your financial portfolio.

A Basic Single Premium Guaranteed Return Plan is a type of life insurance policy that offers a guaranteed return on your investment. Here's a breakdown of how it works:

• When you buy the policy, you invest a lump sum amount as a single premium.
• The insurance company guarantees a specific rate of return on your invested amount. This return is typically payable at the end of the policy term.
• A portion or the entire premium is invested in various funds chosen by the policyholder. This part aims to grow the money over time.
• Throughout the policy term, you are covered by a life insurance policy.
• In case of your unfortunate demise during this period, the nominee receives the sum assured. 
• Upon maturity of the policy, you or your nominee receive the guaranteed maturity benefit, along with any applicable bonuses.
• You can also add the available riders to customise the policy as per your requirements and enhance the benefits.

Important Consideration

The guaranteed returns in the single premium guaranteed return plan are generally lower than market-linked investment options. Your money is locked in for the policy term, making it less accessible than other investment avenues. It is advisable to consult a tax advisor to understand the tax benefits and liabilities associated with the plan.

A Single Premium Guaranteed Return Plan is a type of life insurance policy where you pay a lump sum amount (single premium) at the beginning, and the policy guarantees a return after a specific period. 

Here's an example to illustrate how this works for a person named Rajesh.

Rajesh, a 40-year-old freelance consultant, has always been cautious with his finances. With an irregular income, he needed a safe and secure investment option to ensure a stable future for his family. After much research, Rajesh found the perfect solution: a Single Premium Guaranteed Return Plan.

Profile Details:

• Name: Rajesh
• Age: 40 years
• Financial Goal: Secure a lump sum amount for future needs with guaranteed returns
• Investment Amount: ₹10,00,000 (single premium)

Policy Details:

• Policy Term: 10 years
• Sum Assured: ₹15,00,000 (the guaranteed return)
• Maturity Benefit: The amount received at the end of the policy term, which includes the guaranteed return and possibly a loyalty addition or bonus, depending on the insurer's terms.

Rajesh pays ₹10,00,000 as a single premium at the start of the policy. The policy term is 10 years. During this period, Rajesh does not need to make any additional premium payments. At the end of the 10-year term, He will receive a guaranteed sum of ₹15,00,000. This amount is pre-defined and is not subject to market risks.

Maturity Scenario in Single Premium Guaranteed Return Plan

Year 0: Rajesh pays ₹10,00,000 as a single premium.

Year 10: Rajesh receives the guaranteed maturity benefit of ₹15,00,000.

Rajesh managed to ensure his family's financial security by making a safe investment. He intended to use the ₹15,00,000 maturity benefit to support his children's education and save some for his retirement. 

He might be eligible for tax benefits on the premium paid under Section 80C of the Income Tax Act, and the maturity proceeds could potentially be exempt from taxes under Section 10(10D), depending on the current tax regulations.

Death Scenario in Single Premium Guaranteed Return Plan

If Rajesh were to pass away before the end of the 10-year term, his nominee or beneficiary would receive the death benefit, which would be significantly higher than the ₹10,00,000 single premium paid. This amount would help the family manage financial obligations in the absence of the primary earning member.

Disclaimer: The information provided in the Single Premium Guaranteed Return Plan is illustrative and based on assumed rates of return. Actual returns may vary, and the final death benefit amount could differ from the figures shown.

1. Single Premium Payment

2. Life Insurance Coverage

3. Guaranteed Maturity Benefits

4. Surrender Benefit

These Plans attain a surrender value after the payment of single premium. Usually, surrender is not allowed during the first year of the policy and you can surrender it from second year onwards.

While it is always beneficial to continue your policy, however, if you need to surrender the policy due to any reason, you are paid the higher of the two kinds of surrender values: Guaranteed Surrender Value or Special Surrender Value.

5. Loan Benefits

6. Tax Benefits

7. Income Benefit

8. Policy Continuity

9. 100% Investment of Your Premium

10. Diverse Fund Options

11. Multiple Fund Switches Without Charges

12. Wealth Boosters

13. Family Security Under the MWP Act

Buying a Single Premium Guaranteed Return Plan online is a straightforward process. Here’s a general step-by-step guide to help you:

• Step 1: Understand your financial goals and how much you can invest regularly or as a lump sum. 
• Step 2: Research and compare plans, features, guaranteed returns, premium options, and policy terms.
• Step 3: Initiate the process by completing the online application form.
• Step 4: Provide your personal information, financial details, nominee details, and upload the necessary documents.
• Step 5: Include additional riders or add-ons required for your policy.
• Step 6: Pay the premium online using a debit/credit card or net banking.

Note: Once you receive the policy document, it’s important to read it carefully to understand the terms and conditions, including the surrender value, loan benefits, and any additional riders you may have opted for.

The Lump Sum Investors

Retirees Looking for Estate Planning Tools

Wealthy Individuals Seeking Tax Shelter

Those Seeking a Simplified Insurance Experience

Young Professionals with Disposable Income

Parents Planning for Their Child’s Future

Before investing in a Single Premium Guaranteed Return Plan, it's important to carefully evaluate the plan in consideration, its features, your financial situation and how the plan benefits are aligned with your investment objective.

Here are a few important factors to consider and steps to take:

1. Evaluate your Financial Goals and Needs

2. Assess the Availability of Funds for Premium Payment

3. Check the Guaranteed Returns

4. Evaluate if the Insurance Coverage is Sufficient

5. Know About the Surrender Value

Familiarise yourself with the surrender value of the policy. You will receive this amount if you decide to terminate your policy prematurely.

Thus, you must know what amount you will receive if you need to surrender your policy due to unforeseen circumstances.

6. Research About your Insurance Provider's Reputation

Research the insurance company offering the plan. Look into their financial stability, claim settlement history, processes, solvency ratio and customer reviews to gauge their reliability.

A reliable insurer with a good history of claim settlements, especially the one that is digital process oriented is more likely to provide you a hassle-free experience during buying, claims, or any other process.

7. Review the Policy Document Carefully

The most underrated and yet, the most crucial step. Carefully read the policy document and disclosure materials provided by the insurer.

Ensure you understand all terms and conditions before committing to the plan. With this, you know what to expect, when to expect and how to make the best out of your investment.

8. Compare with Other Available Options

Mr. Patel, 55 years, Businessman (A Secure Retirement)

Mr. Patel has a substantial lump sum amount. He is looking for a secure investment option to supplement his retirement income. He invests 50 lakhs in a single premium guaranteed return plan with a 10-year term. The plan offers a guaranteed return of 8% per annum.

Benefits:

Mr. Sharma (Child's Education)

Sharma, a young professional, wants to secure his child's higher education, so he invests Rs. 10 lakhs in a single premium guaranteed return plan for a 15-year term. The plan offers a guaranteed return of 7% per annum.

Benefits:

• At the end of 15 years, Mr Sharma receives a lump sum of Rs. 23 lakhs (approx.) to fund his child's education.
• The life cover ensures his child's future in unforeseen circumstances.

Mr. Mehta (Wealth Transfer)

Mehta, a wealthy individual, wants to pass on a substantial amount to his heirs. He invests a large sum in a single premium guaranteed return plan with a long-term horizon.

Benefits:

• The plan acts as a wealth transfer tool, ensuring the money grows at a guaranteed rate.
• Life coverage provides financial protection for the family during the accumulation phase.

In the case of a single premium policy, you pay a lump sum upfront, and the surrender value is typically calculated based on a percentage of this premium.

Several factors influence the surrender value of a single premium policy:

• The longer the policy term, the higher the surrender value is generally.
• Different insurers have varying surrender value terms.
• The type of policy (endowment, whole life, etc.) also impacts the calculation.
• Some insurers impose surrender charges, which reduce the final amount received.

1. Guaranteed Surrender Value (GSV)

2. Special Surrender Value (SSV)

A Single Premium Guaranteed Returns Plan, with its assurance of guaranteed returns and life insurance coverage, offers a solution to secure your aspirations and safeguard your loved ones’ financial future.

A simple investment with a single upfront premium payment, guaranteed returns, flexibility and potential for long-term growth makes it a valuable and easily accessible addition to any financial portfolio.