Financial terms are simple, while their meanings may be complicated! Sometimes they are confusing, and you misunderstand them. However, understanding the terms well will help you make the best of your financial investments. In this regard, you might have come across two different terms, guaranteed¹ returns and assured returns. They look like they mean the same, but a striking difference exists. Let us understand the terms and determine the difference for a better investment.

 

What are Guaranteed¹ Returns?
 

Guaranteed¹ returns are predetermined monetary benefits that you will receive from your insurance provider or any other financial institution such as the banks, irrespective of the organisation's financial health. Therefore, it is decided during the policy inception, and you are entitled to receive it on any condition! Therefore, even if an economic downturn affects the organisation, it will not decrease or negate the fund value that you are bound to receive.

 

Guaranteed¹ returns are predominant in comprehensive life insurance plans and other government schemes.

 

As the returns are guaranteed¹ in a plan, you can calculate the fund required accurately and invest in the plan. For example, suppose the reason behind the investment on guaranteed¹ returns is making a down payment for purchasing your new house five years later. In that case, you can calculate the amount required based on the bank charges and invest accordingly.
 

The policy also offers different payout options such as the endowment plan for guaranteed¹ lump sum benefit, regular income option for a guaranteed¹ regular income for a fixed period and the whole life income for regular income until death.

 

Benefits of Guaranteed¹ Returns
 

Individuals can purchase products that offer guaranteed¹ returns for the following benefits:
 

1. Guarantee¹ return regardless of the financial condition of the organisation.
2. Secure investment platform to save and park your hard-earned money.

 

However, there are a few considerations that you must look into while saving in guaranteed¹ return products.

 

Points to Consider While Purchasing Guaranteed¹ Returns
 

Before you set your money goals with a guaranteed¹ return plan, you must consider these factors:
 

1. Cost - As the returns are guaranteed¹ in the long term and provide a safe platform to save, the cost is slightly more. However, it is definitely worth the saving made!
2. Guaranteed¹ additions - Guaranteed¹ returns and guaranteed¹ additions may not mean the same. Guaranteed¹ additions might accrue based on certain conditions.
3. Period - Guaranteed¹ returns will be made available to you for a fixed period based on the plan features. You must be aware of such features to modify them for your financial needs for better utilisation.

 

What are Assured Returns?
 

Assured returns refer to returns from financial service organisations that are promised while not guaranteed¹. For instance, you are entitled to an interest payout on a loan or a bond with a private company. In that case, the interest payments are assured. However, if a lack of financial stability causes stressful situations in the organisation, you may not receive the interest payments as stated. It is the same with fixed deposits, corporate deposits, real estate schemes, etc.

 

Therefore, you will not receive the benefits if the organisation declares bankruptcy or does not have sufficient funds to pay you the assured returns. On the other hand, if the organisation suffers from market-related volatility but is still stable financially, you are entitled to receive the returns at any cost. 

 

Benefits of Assured Returns
 

While assured returns are subject to the organisation's financial health, certain benefits can accrue in the long run.
 

1. If you have chosen a reliable organisation, the risk factor is lesser. And even if assured returns are denied, you can ask for compensation by filing a case with the court.
2. If the performance of the financial institution increases, your returns are safe and may increase through the policy term based on the conditions.
3. If the market conditions are favourable, the government might change the financial parameters, such as increasing interest rates that correspondingly reflect on the returns to encourage new investors.
    

While an assured return plan has its benefits, the following pointers will help you make an informed decision considering the critical factors.
 

Pointers to Consider While Purchasing Assured Returns
 

The following points are important when purchasing financial products that provide assured returns.
 

1. Financial stability - You must research the organisation's financial stability by studying and analyzing the financial statements and other relevant parameters.
2. Performance record - You also have to track the organisation's performance in the previous years to understand how it can withstand market conditions profitably. It will help you assess the risk factors before purchasing the assured return scheme.

 

Conclusion
 

Guaranteed¹ returns and assured returns are often used by financial institutions interchangeably, but,  they are not the same. Guaranteed¹ returns are entitled to you irrespective of the company's financial health. But, on the other hand, assured returns are promised while not guaranteed¹.

 

L&C/Advt/2022/Nov/2846