monthly income plan a quick guide

Monthly Income Insurance Plan – A Quick Guide

Having an additional source of income is extremely vital in case something unexpected happens to your primary revenue stream, or you require emergency cash. This is the reason why a majority of people make a smart move by investing in insurance plans.

However, traditional term plans have the drawback of giving your family a lump sum payment only after your passing rather than doing it while you are still alive. This is where monthly income insurance plans come as a life savior.

In this quick guide, we’ll examine such plans, analyzing their features and advantages to help you decide if they’re the best investment choice for you.

What Is A Monthly Income Insurance Plan?

A monthly income insurance plan is an insurance product that, true to its name, provides you with fixed monthly income distributions for a considerable amount of time in exchange for the regular payment of amounts known as premiums. Due to the guaranteed monthly payouts it offers, it is sometimes referred to as a ‘guaranteed monthly income plan’.

The purpose of monthly income insurance plans is to give policyholders a regular and steady stream of income. This means that these plans are managed so that fixed income contributes to a consistent stream of income and you can avail of its incredible benefits.

How Does A Monthly Income Insurance Plan Function?

Under a monthly income insurance plan, the policyholder is required to pay the premium on a regular basis to the insurance provider. In case the policyholder survives throughout the premium payment term, he/she will get a regular monthly income till the end of the policy tenure. The insured also gets a terminal bonus and a simple reversionary bonus at the end of the policy term.

However, in case the policyholder unexpectedly dies during the policy tenure, the insurance provider will give regular monthly income to the nominee. He/she will also get the premiums paid by the policyholder up till death. In addition, a terminal bonus and a simple reversionary bonus will be paid out at the end of the tenure.

For example, Mr. Rajesh purchases a monthly income insurance plan of 10 years premium payment term. The policy tenure is 20 years. He pays a regular premium to the insurer for up to 10 years. In case he survives 10 years, he will start getting a fixed monthly income for the next 10 years. However, if he unfortunately dies within the policy tenure, his nominee will get the benefits. This simply means that Mr. Rajesh will get a life cover for 20 years.

Key Features & Benefits Of Monthly Income Insurance Plan

A number of features and advantages of monthly income insurance plans make them an appealing alternative to traditional term plans. The following are some of the highlights of such plans:

  • Assured Monthly Income: A monthly income insurance plan offers consistent payments each month. Because the income is assured, there will always be money coming in. This income can serve as a replacement for your post-retirement salary or as an addition to your current income.
  • Flexibility In Payout Options: In the event of an unexpected circumstance, you can decide how your loved ones will be given the money. A lump sum payout option is appropriate if they require money to pay off immediate obligations like unpaid debts. They can also maintain their quality of living with monthly payments.
  • Flexibility In Premium Payment: The premiums can be paid at intervals that fit your spending budget. Regular monthly, semi-annual, or annual premium payments are available for the duration of the insurance. Another choice is a single lump sum payment.
  • Lump Sum Maturity Benefit: These plans payout a lump sum amount at the end of the insurance period. Most of the time, this total return is discretionary because people can ask to have the money added to their monthly benefit instead.
  • Coverage For Life: If a misfortune occurs within the policy’s term, your loved ones will be compensated with a guaranteed sum. It can cover your family’s expenses so they won’t face hardships while you’re away.
  • Bonus Amounts: Numerous monthly income insurance plans provide bonuses to compound over several years, giving the insured person or nominee higher sums. Reversionary, interim, and terminal bonuses are the three different sorts of bonus amounts under the plans.
  • Tax Benefits: Section 80C of the Income Tax Act of 1961 permits deductions for monthly income insurance plans. The premiums you pay are deductible up to 1.5 lakh rupees from your taxable income.

Top 5 Monthly Income Insurance Plans In India

Here are the top 5 monthly income insurance plans in India that you can consider buying:

1. Aditya Birla Sun Life Monthly Income Plan

Aditya Birla Sun Life Monthly Income Plan is an open-ended income plan which primarily aims to produce consistent income through investments in fixed income securities in order to distribute or make monthly payments to unit holders.

Key Features:

  • Aside from cash and cash equivalents, the plan invests mostly in different debt securities under regular market conditions.
  •  It also keeps a little amount of exposure to equity markets.
  • Additionally, it receives income through the amortization of the discount on debt investments, dividends, the acquisition and sale of securities, and coupon payments from debt securities.
  • Growth of capital through equity investments is the plan’s secondary goal.
Fund TypeOpen Ended
ClassIncome
Minimum InvestmentRs. 1000
Inception DateNovember 20, 2000

2. HDFC Life Super Income Plan

HDFC Life Super Income Plan is a recurring money-back guarantee plan with various advantages and bonuses. It is a deal for people who require additional money to cover daily costs and to achieve their goals at different phases of life.

Key Features:

  • After the term for paying the premium, you will receive a guaranteed recurring monthly income for a period of 8 to 15 years.
  • In the second year of the insurance, there is an option to pay a single premium and start receiving a regular income.
  • There is also flexibility in premium payment options. You can select between paying a single premium and paying premiums over terms of 5, 8, 10, or 12 years.
  • The plan also has a loan facility.
Minimum Entry Age

For Policy Term Less Than 18 Years: 18 Years Minus Policy Term

For Policy Term Greater Than OR Equal To 18 Years: 30 Days

Maximum Entry Age

For Policy Term 15 & 16 Years: 59 Years

For Policy Term 18 Years: 57 Years

For Policy Term 20 Years: 55 Years

For Policy Term 22 Years: 53 Years

For Policy Term 24 Years: 51 Years

For Policy Term 27 Years: 48 Years

For Policy Term 15 To 27 Years Under Option 9: 34 Years

Maturity Age18 To 75 Years
Minimum Sum Assured On Maturity

Limited Pay: Rs. 76,198

Single Pay: Rs. 18,457

3. PNB MetLife Guaranteed Goal Plan

The PNB MetLife Guaranteed Goal Plan is the ideal way to save money while getting guaranteed returns. The plan gives you the control and flexibility to create a savings strategy while protecting your goals against unanticipated life occurrences. It is especially made to make it easier for you to enjoy life’s freedom and reduce your worry about the future.

Key Features:

  • The plan offers you the flexibility to get benefits either in lumpsum or guaranteed income.
  • The plan offers additional benefits including Family Care Benefit and Health Care Benefit.
  • The policyholder can choose from various income payout options, such as yearly, half-yearly, quarterly, and monthly.
  • Once the policy acquires surrender value, you may take a loan against your policy.
Minimum Entry Age0 (30 Days) To 18 Years
Maximum Entry Age60 To 65 Years
Policy Term5, 7, 10, 12, 15, 20, 25, & 30 Years

4. ICICI Pru Guaranteed Income For Tomorrow

It is a life insurance policy with guaranteed benefits that emphasizes protection and savings in order to help you reach your objectives in life. You can choose to receive the guaranteed income either on a monthly or yearly basis.

Key Features:

  • Your family’s financial security is covered by this plan.
  • You will receive benefits that are assured in the form of a lump amount or ongoing income to assist you in saving for your objectives.
  • The plan offers an option to start receiving guaranteed income after two years.
  • According to the current tax laws, tax benefits may be applicable on premiums paid and benefits received.
  • You have the choice of borrowing money against your policy to assist you in times of dire need.
Plan OptionsLump-Sum, Income, Early Income, Single Pay Income
Maximum Annual PremiumRs. 2,50,000
Maximum Sum Assured On DeathRs. 25,00,000
Minimum Entry Age18 Minus Policy Term
Maximum Entry AgeUp To 60 Years
Policy Term6, 7, 8, 9, 10, 11, 12, 13, 15, 16, & 20 Years

5. SBI Annuity Deposit Scheme

SBI Annuity Deposit Scheme is merely an investment product in which investors must make a lump sum deposit and can earn monthly annuity installments that comprise a portion of the initial amount as well as interest.

Key Features

  • The plan enables the consumer to make a single lump sum deposit and receive repayment in the form of regular annuity payments that include both the principle and interest.
  • The deposit amount is based on a minimum 1000 rupees per month annuity for the applicable period.
  • Additionally, deposits up to Rs. 15,00,000 may be paid early. Premature payment is permitted without restriction in the event of the depositor’s death.
  • In exceptional circumstances, an overdraft or loan of up to 75% of the remaining annuity amount may be provided.
Period Of Deposit36/60/84 OR 120 Months
Maximum Deposit AmountNo Upper Limit
EligibilityResident Individuals, Including Minors
Maturity Duration3 To 10 Years

Bonus Amounts Under Monthly Income Insurance Plans

As discussed earlier, there are three types of bonus amounts under the monthly income insurance plans:

  • Reversionary Bonus: This is a sum that the insurance provider announces as a portion of the total assured. This is added to the amount due at the conclusion of the plans’ policy period and is declared annually depending on the company’s overall performance.
  • Interim Bonus: If declared, it increases the overall bonus amount that the insured receives upon policy maturity or what the nominees would receive in the terrible event that the policyholder passes away during the interim period of calculation.
  • Terminal Bonus: At the conclusion of the policy, the insurance company awards a terminal bonus. It is awarded at the company’s discretion and is primarily intended to express the insurer’s gratitude to the person for continuing to maintain the policy and paying their premium on time for so many years.

Who Should Purchase A Monthly Income Insurance Plan?

Monthly income insurance plans are best for the following people:

  • If you’re retired, semi-retired, or just trying to make a regular income.
  • If you belong to a higher tax bracket, you can consider these plans for higher tax savings.
  • If you are looking for a regular income plan that can provide you with lifetime coverage.
  • If you wish to have higher sums in the form of bonuses.

Final Thoughts

There are no two ways about the fact that one of the few tools that provide both life insurance cover and a consistent income stream is the monthly income insurance plan. Always keep in mind that the finest monthly income insurance plan gives you and your loved ones the best of both worlds, whether you are there or not.

You should therefore understand that these plans can be a good alternative for you if you have been investing heavily in term insurance. Even financial experts suggest that adding a monthly income insurance plan to your portfolio is a wonderful approach to increasing your wealth in a disciplined way.

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