Why should you invest in a Monthly Income Plan?

by Abhishek K. Digital Business Executive

If anything, different types of life insurance plans are all set to see a steep climb in the coming years, given the ongoing uncertain circumstances. Investing in life insurance irrespective of age is gaining significance with emphasis on insurance plans that fetch regular monthly income.

The Monthly Income Plan is an investment option designed for those investors and pensioners who are conservative and would prefer to park their money in lower-risk securities. Conventionally such investments reap interest or dividends and act as a steady, assured source of income; today life- insurance plan providers have begun to couple this benefit along with life-cover. Why is the monthly income plan offered by insurance service providers attractive?

They combine a lump sum money payment at the end of the term and the interest passed on as monthly income.
The sum assured includes the guaranteed maturity benefit and a bonus component declared by the insurance company.
The insured or his nominees can benefit from this assured monthly income plan in the absence of the insured.

Before opting for a monthly income plan, one must take into account the returns expected, the period of pay-outs and the premium involved, and the scope for additional coverage. But of course, each of these factors will be governed by the investors' earnings, the lifestyle they have and aspire to have in the future, tax saving options, etc.

What are the benefits of a monthly income plan?

The benefits of investing in monthly income policies extend beyond a guarantee of assured income that the insured/nominee will receive.

Monthly investment plans provide a specific life cover for the insurance with several add-on riders. This helps the insured stay prepared for any unforeseen mishaps that may occur.
As mentioned earlier, the best plans offer bonus amounts, generally at the end of the plan period, along with the lump sum payout at the end of the term.

Let’s say that an average of 1% simple interest bonus is paid out each year for 20 years- there will be a 20% bonus to the sum assured at the end of the policy period. This total bonus can add up to a substantial amount and can be used by the insured to meet large financial commitments such as renovation, college expenses, and so on. This bonus amount is also payable to the nominees of the insured in case of an unfortunate event where the insured one passes on.

Monthly income plans offer tax benefits under section 80C and section 10(10D) of the Indian Income Tax Act. Now this implies your income is considerably reduced, along with the possibility of getting the income tax slab reduced to a lower tax slab.