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Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

Confused between guaranteed savings plans and guaranteed income plan. This article will assist you in making the best choice by letting you know how their premiums, policy periods, maturity benefits, taxability, and loan advantages differ.

  • 6,444 Views | Updated on: Mar 20, 2024

As our lives get modernized with the growth of technology, so do our requirements and needs. However, to ensure that we keep up the pace and update ourselves at the rate of the world around us, we need to be financially stable. Financial stability is not just about having enough in your account to sustain yourself. For many people, financial stability means having enough in the banks for a fulfilling and modern life. Now, to achieve financial stability, investment is a key process. But the question here is where to invest to achieve stable financial growth. And, at the same time, meet the requirements of our modern lives?

It is well known to us that modern problems need modern solutions. This fact highly influences even the financial world. So, it brought modern solutions for investment in the forms of Guaranteed Savings Plans and Guaranteed Income Insurance Plans.

This article will discuss Guaranteed Savings Plans vs Investment plans and explain the difference between Guaranteed Savings Plans and Guaranteed Income Insurance Plans. Once you understand the key points of the guaranteed savings plan vs investment plan, you will know which one is the best fit for you and your long-term goals.

What is a Guaranteed Savings Plan?

Straightforwardly, Guaranteed Savings Plan, also known as GSP, is a non-participating non-linked endowment life insurance plan. Too technical, right? Let us make it simpler for you.

GSPs are generally non-participating plans with no role for the policyholder in investment matters, and the insurance company manages the whole fund. Additionally, GSPs also offer an endowment assurance at a fixed amount. As per the terms of GSP, you have to pay the premiums for a fixed tenure, and once the plan achieves maturity, you are entitled to its benefits. In addition to the fixed annual rate of interest component, these benefits also include advantages such as maturity bonuses and loyalty rewards, depending on the insurer.

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

What is a Guaranteed Income Plan?

A Guaranteed Income Plan (GIP), also known as Assured Income Plan, is a savings-cum protection plan. Many would say that it is a traditional plan. However, this plan follows traditional investment techniques in a modern way. This plan is also a dual-benefit plan. Unlike ULIP plans, they do not offer short-term maturity. These are non-participating and do not allow you to participate in the investment strategy.

GIPs are investment tools that help you save money while providing a life cover for 30 long years. This gives you financial protection for you and your family from uncertainties and your absence.

In simple terms, GIPS are traditional non -participating insurance plans with a modern investment approach that offer maturity and death benefits. They have a very long maturity period and serve as a 2nd source of income post-retirement and your pension amount to help you meet the post-retirement requirement.

So, both the Savings Plan and Guaranteed Income Insurance Plan are great choices for long-term financial stability. First, however, you must understand the difference between both them.

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

Parameters

Guaranteed Savings Plan

Guaranteed Income Plan

Premiums

Annually or Instalments

Annually or Instalments

Policy Term

Min: 7 Years

Max: 10 Years

Min: 10 years

max: 30 years

Maturity Benefits

Guaranteed maturity benefit + Guaranteed additions

Assured income payout + lump sum benefit at the end of policy term

Taxability

Upto ₹1,50,000/- deducted under 80C per annum

Upto ₹1,00,000/- deducted under 80C per annum

Loan benefits

Yes, maximum up to 80% of the prevailing surrender value

Not available

Opting either of these plans depends on your financial goal. You must ensure that you don’t miss out on the premiums to avail maximum benefits from these plans.

Guaranteed maturity benefits

Mature benefits are claims made by policyholders based on the policy’s maturity. The policy must be maintained until the contract’s term is through in order to receive the maturity amount. The insurance provider gives the insured the assured benefits of a life insurance policy at the end of the term and the maturity sum, which is a multiple of the premiums paid up until that point. The premium the insured has paid is gradually increased by the guaranteed life insurance payouts.

The policyholder receives a refund of the premiums paid up until the end of the maturity period, as well as additional benefits. The insurance company has already disclosed these additional benefits to the insured through its terms and conditions. The policyholder receives a bonus towards the end, and the bonus’s component parts keep increasing.

Feasibility

Depending on your goals and finances, you can determine the length of your plan and its coverage. Compared to traditional life insurance, the premium paid is reasonable and provides better returns. The basic sum assured, the guaranteed addition, and the loyalty addition makes up the total maturity benefits. The experts advise investing in GSP for a longer period of time to maximise returns.

Flexibility

When your insurance expires, you will either get a lump sum payment or periodical payments over a predetermined period of time. When a large sum of money is given to an employee all at once rather than in multiple instalments, this is known as a lump sum payment. Lump sum payments have less value when used to pay for products or services because the entire amount is paid all at once rather than over time.

Instalment payments allow you to spread out the expense of a purchase over a longer period of time by making regular, small instalments. Consumers typically make instalment payments for medium- and large-ticket items.

Tax benefits

The Income Tax Act’s Sections 80C, and Section 10 (10D) will both grant the insurer tax benefits. The former means that taxes are not required on premiums up to ₹1.5 lakh, and the latter means that any money received by a nominee as a result of death benefits (or at policy maturity) is also tax-free. According to the Income Tax Act, people with a savings plan can take advantage of a tax-free lump sum payment at the conclusion of their contract. You must specify the time period for the maturity according to your preferences before enrolling in this plan.

Wrapping up

contrast, a lump sum payment gives you flexibility and discretion in spending money. If you want assured returns for your future ambitions, a Kotak Guaranteed Savings Plan from a trustworthy insurance provider is the best option. It has low risk, produces high returns, offers tax advantages, and gives investors various payout options. These plans also give you the option of a limited premium payment term and guaranteed maturity benefits to meet your financial goals.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Kotak Guaranteed Fortune Builder

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Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.

  • Guaranteed@ Income Benefit for upto 25 years
  • Flexibility to choose income period
  • Premium break for females on child birth or any listed specific illnesses
  • Life cover for the premium payment period
  • Enhance your life cover with rider offerings

ARN. No. KLI/23-24/E-BB/1201

T&C

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Features

  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
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  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999

T&C

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