In a world full of uncertainties, securing the financial future of yourself and your loved ones is imperative, especially if you wish to sail through the turbulent periods of your life without any setbacks. The COVID-19 pandemic brought this aspect into the spotlight when a small but deadly virus shook the financial world, uprooting millions of lives and seriously hampering the financial future of many.

Amid all this uncertainty, it is certainty that most of us seek — a certainty of future. For instance, a new parent would want to ensure that no matter which uncertainty strikes in their future, it should not impact their child’s life goals. To finance the needs of the future, one needs to invest today. To attain this kind of certainty in investments can be tricky, but that is where a guaranteed returns plan can come to your rescue.

What are Guaranteed Return Plans?

Guaranteed return plans are ideal for long-term investment. They are not affected by market volatility and offer a guaranteed return on investments over a period of time. Most plans offer returns as a lump sum payment on maturity, while others have the option of monthly payments or a combination of the two. Many new age guaranteed return plans come with the flexibility of payments, choice of tenure and life insurance coverage along with guaranteed returns.

Guaranteed return plans make sense for those who have specific non-negotiable life goals at fixed stages of life since you know in advance the exact amount of money you would receive on maturity. So for goals like retirement, children’s education or marriage, or even buying a car or a home, guaranteed return plans can come in handy to help you plan for, and achieve those goals.

Benefits of Guaranteed Return Plans

Higher, tax-free returns: Not only your returns are guaranteed, but they are also higher compared to other comparable products. The best part is that the returns are completely tax-free, which further increases your actual realised returns. For instance, compared to a 5% return on fixed deposits – on which you would also need to pay income tax – Guaranteed return plans can reap returns up to 6-7%, absolutely tax-free. For instance, a 30-year-old investor can get returns as high as up to 7.2% in the Max Smart Fixed Return Digital plan. This is a great option generating considerably high returns in the long run, especially if we compare it with other traditional zero-risk savings options. Not only that, you can also claim tax deductions on the premium that you pay.

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Risk-free investment: With guaranteed return plans, your investments are insulated from all kinds of uncertainties and volatility that surround the external world. Opting for a guaranteed return plan means that you lock the rate of return when you buy the plan for the entire tenure. One would notice that over the last decade or so, the interest rates on fixed deposits and savings bank accounts have been on a decline, coming down from over 9% to around 5%. On the other hand, guaranteed return plans give you guaranteed and higher returns. So, irrespective of whether interest rates go down or stock markets crash, the interest rates that you locked remain the same, and so do your maturity returns from the plan.

Insurance coverage:These plans come with life insurance coverage which ensures that your family’s future is secure whether you survive the policy term or unfortunately leave the world suddenly. So essentially, this investment-insurance combination ensures that not only do you have good financial backing during your life, but it also creates a robust safety net for your loved ones to protect them from life’s uncertainties.

Flexibility of payments and tenure:The new-age guaranteed returns plans also come with a lot of flexibility, be it when it comes to the lock-in period or the frequency of premium payments. For instance, one can choose to go for a guaranteed return plan locking the interest rate for as long as 45 years. On the other hand, one can also choose a plan with a tenure of only five years. So not only these plans can help you with your long-term goals, but because of their shorter lock-in period and ease of liquidity, they are ideal for short-term financial planning as well. Even when it comes to the payment of premiums, these plans come with a lot of flexibility. For instance, Aditya Birla Sun Life Insurance’s Fixed Maturity Plan comes with the option of “single-pay”, wherein you pay only one premium in your lifetime and get covered for 5-10 years. Most guaranteed return plans also offer the flexibility of paying your premiums at an annual, semi-annual, quarterly or monthly intervals.

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New-age benefits: Keeping the current times in mind, many of the new guaranteed return plans are designed for digitally-savvy millennials. For instance, Max Life Smart Fixed-return Digital Plan comes with a simplified digital onboarding process that is easy, quick, and hassle-free, and gets yourself insured in the shortest possible time. All you need to do is decide the amount you want to invest, choose the policy term and variant and simply pay online. In three simple steps, you can secure the future of your loved ones. It is that simple. The plan also comes with special benefits for women investors wherein they get additional maturity benefits as compared to male customers of the same age. Women investors stand to gain an additional 0.25% maturity benefit for a policy term of 5 years and 0.5% of additional maturity benefit for a policy term of 10 years.

As opposed to a high-risk-high-reward approach, guaranteed return plans offer you the certainty of the future. Using this investment instrument, you can build a significant corpus for your future, along with getting insurance coverage. With low returns on fixed deposits, these plans make a lot of sense to be included in your portfolio.

(By Vivek Jain, Head – Investments, Policybazaar.com)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment.