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We are living in tumultuous times. Given the pandemic and its long-lasting effects, there have been health consequences for most of us involved. There may be an adverse impact on health and that takes the highest priority. However, there are bound to be some financial effects as well—they could be temporary or permanent, depending on how prepared you are for it. If you are earning now, you might suddenly find yourself out of employment. Or you might be retiring, and you would need a steady source of income in times to come. If you run a business, a similar risk could also pop up. Safe to say, it is important to have a backup of steady income. Having an income plan becomes extremely important in such circumstances. This problem is solved by taking a Monthly Income Plan.
As the name suggests, a Monthly Income Plan generates a steady income payout over a longer period of time. This naturally happens once you have paid the premium for a few years. It is important to distinguish this from a mutual fund. Any Monthly Income Plan offered by life insurance companies provides stable income payouts along with a life cover—sometimes, this is also accompanied by a maturity benefit payment at the end of the tenure. There is no life cover in Monthly Income Plans offered by mutual funds.
To take a Monthly Income Plan, you will have to pay the premium during the tenure of premium payment. At the end of this term, if the policyholder is hale and hearty, he/she will receive a payout till the end of the policy tenure. In some cases, you get the option of receiving the payout even within the premium payment tenure, which could be a big plus
Having a stable income plan or income protection insurance is important. Here are five reasons why you should have a Monthly Income Plan:
The core feature of any life insurance Monthly Income Plan is a combination of income and life cover extended up to varying durations. For instance, in TATA AIA Life Insurance Guaranteed Monthly Income Plan (110N147V02), the duration of guaranteed1 income can be chosen up to 24 years. The life cover provided to the policyholder is also extended to the dependents or loved ones, which is an additional benefit.
The income payouts arising from Monthly Income Plans are safe from fluctuation as they are not linked to the market. This means that irrespective of whether the market is performing well or going down, your income remains safe and sound. This also means that Monthly Income Plans have an advantage over other market-linked plans, especially for those who would prefer certainty over volatility.
Most life insurance Monthly Income Plans have bonuses associated with them. It could be a cash-based bonus, an income-centric boost, or a one-time payout eligible at the end of the policy tenure. These bonuses could be linked to the market, making the amount variable. For example, by paying an additional premium, you get the option of increasing your monthly income payout.
The premium paid towards these Monthly Income Plans is eligible for deduction from taxable income. Another tax benefit that can be claimed is on income and maturity amount. If you plan your taxes right, this could mean a decrease in your taxable income and consequently might lead to a reduction in your applicable tax slab.
Most Monthly Income Plans have the option of multiple riders or add-ons that can be taken to ensure greater coverage or higher benefits for enhanced protection. If you are worried about retirement, you can add Retirement Plan riders. Additional riders could also be taken to safeguard against accident and/or dismemberment through extended coverage.
If you are worried about the risk element, the returns from the Monthly Income Plans are stable and consistent since they are not subject to any market fluctuations. From your returns point-of-view, the Monthly Income Plans are invested in a mix of debt and equity funds—the returns are significantly higher than the traditional monthly income schemes in Post Offices and FDs.
While there is a lot of information available on the internet and other sources, there are a few factors that you need to keep in mind before taking a new Monthly Income Plan:
Financial goals: what are the short-term and long-term goals that you want to achieve through your Monthly Income Plan?
Returns: what is the potential wealth that the Monthly Income Plan could generate for you, especially in line with the goals that you have set?
Risk: what is the risk appetite that you have for the funds that you invest in Monthly Income Plans?
Payout options: is there flexibility available with respect to receiving the payouts, or is there a requirement that you have about the timing of receipt of payouts?
Existing insurance cover: what are the life insurance or group health insurance policies that you are already covered under?
When you buy a Monthly Income Plan, think of it as insurance—income insurance. It is important for you to keep in mind that safeguarding the future only in a single way through maturity payout is not going to be enough. Having plans like these put you in a better position to control your future and secure your family. A Monthly Income Plan gives you an additional asset base that you can rely on after you retire or in the event of any financial exigency. Whether you choose a plan that pays you out only on maturity or a plan that gives you monthly income, having an income plan is the key to sustaining a life without having to compromise on your lifestyle.
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Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
#Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
2These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid.