Key takeaways
It would be best if you preferred Guaranteed Savings Plan over Monthly Income Schemes due to the following reasons.
Each individual spends most of their life in a monotonous and struggling environment to make money and save a fair share for the security and stability of themselves and their families. The hustle and bustle to reach and attain the financial goal are constant in every individual’s life, and they put in their sweat and blood for that. Therefore, undoubtedly one should find the safest platform for their monetary investment that could yield high returns and profits shortly.
- Tax Benefits
- Guaranteed maturity returns
- Flexibility
- Accessibility
- Minimal risk factor
The financial market has numerous and overwhelming platforms that try to sell you their plans through which you can save your money, but it’s not wise enough for you to invest in such schemes that are unsuitable for you. It would be remarkably better for you to focus on the whole prospectus of plans suitable to your financial goals.
What are Monthly Income Schemes?
A monthly Income Scheme (MIS) is most suitable for investors who wish to earn regular fixed returns at a specific interest rate every month. This investment option, however, comes with lower risk. Still, at the same time, it does not guarantee you the fixed revenue that you could have attained by investing in other market investment options, such as a guaranteed savings plan that provides assured returns.
MIS is a debt-oriented scheme as a significant share of 70-80% goes into debt funds, and the rest is invested into stocks. Also, you should invest in such schemes only if you want to meet your short-term goals, as these won’t benefit your long-term financial goals.
What is a Guaranteed Savings Plan?
A Guaranteed savings plan or a guaranteed return plan can be termed as non-linked, a non-participating insurance plan that yields assured returns on your savings and investments. This plan comes with detailed rules and regulations, and you should always research well about them to judge if it is a suitable investment plan for you.
In GSP, the interest rate is fixed at the beginning itself. A maturity bonus is added to the fixed lump sum amount paid at the end of the maturity tenure. The time duration of maturity can vary from 7-18 years, as it is a long-term plan it helps you achieve your financial goals and keeps you prepared for unpredictable tragic events. In case of the unfortunate demise of the person insured, GSP offers you a fixed lump sum amount for the financial security of your family and loved ones.
Difference between Monthly Income schemes and Guaranteed Savings Plans
Every investment and savings plan has its pros and cons, and it depends on an individual’s requirements and financial goals and which savings plan they would prefer to choose. If one is looking forward to meeting their short-term expenses, they can go forward with monthly income schemes. Still, if you are trying to save for your secure and hassle-free future, you should focus on the long-term benefits of guaranteed return plans and savings insurance plans.
Below are the few differentiating parameters between the two saving prospects that can help you choose the right option for yourself:
Types
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Guaranteed Savings Plans
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Monthly Income schemes
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Time Period
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GSP focuses on your long-term financial goals, as its maturity date varies from 7 to 18 years. Therefore, its primary focus is maintaining enough savings for future education, medical requirements, etc.
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MIS is a monthly policy, with a maximum tenure of about five years, for instance, in the case of the Post Office Monthly Income Scheme. It focuses on your short-term goals.
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Maturity Returns
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You obtain the assured maturity benefits as pledged on the plan’s maturity. You can accept the same by various modes like lump sum payout or on a monthly ground considering your needs and objectives. Subject to the policyholder’s tragic demise, the secured returns are paid to the family or close ones.
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A fixed amount is transferred to the policyholder’s account each month, along with the fixed interest rate.
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Flexibility and Accessibility
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You can pick the best option based on your economic goals and the time bracket you prefer. You can also opt for a scheme based on your budget and priorities. The full maturity advantages comprise guaranteed basic sum, ensured addition, and loyalty. According to the specialists, staying invested in GSP for longer is more satisfactory for obtaining higher returns.
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MIS provides you with comparatively lesser options in terms of policy plans and does not provide you with any guarantee on returns on your savings.
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Tax Benefits
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You can benefit yourself from the tax-exemption advantage under section 80C of the Income Tax Act, 1961, for the premiums paid up to ₹1,50,000.
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Monthly Income Schemes do not usually rebate any tax benefits.
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Risk Factor
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A guaranteed savings insurance plan comes with negligible risk.
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Monthly Income Scheme comes with low to moderate risk.
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Conclusion
Concluding, a guaranteed savings insurance plan would be better for those who wish to understand the dynamics and scope of savings in the long term. Guaranteed savings plans are the ones provide you with assured benefits and perks and can ease your journey in the coming times. If you wish to save for your children’s wedding or medical emergencies, realise your goal and invest in the best-guaranteed savings insurance plan today. You should carefully study your financial goals and allocate your hard-earned money to the best investment policy for your comfort.
- A Consumer Education Initiative series by Kotak Life
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.
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
