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How good are the guaranteed monthly income insurance plans?

Products that combine insurance and investment are generally not a good idea

Do guaranteed monthly income plans offered by insurance companies provide better returns than FDs or debt funds?
-Dhanesh Dubey

It is advisable to keep your investments and insurance separate. The insurance products with inbuilt investments have given historically low returns ranging from 4 to 5 percent (post tax). On the other hand the current rate of interest for fixed deposits is at 7.5% and short term debt funds have given an average return of 9 % in the last 5 years.

In Monthly income plan, you have to pay premiums for 5 years, from the 6th year onwards you will get a monthly income which will generally be slightly more than your annual premium. And at the end of the term you will get a terminal bonus paid out as lumpsum.

Buy a pure term life insurance plan to buy an adequate life insurance cover. You should invest in equity mutual funds to achieve your long-term goals of five years and above. If you are a newcomer to the stock market, choose a top-rated balanced scheme and start investing every month via a Systematic Investment Plan (SIP).

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