ING Life launches Guaranteed Income Insurance plan
Two weeks back, ING Life launched Guaranteed Income insurance plan which indicated that it would provide 13% guaranteed returns. Every one is tempted towards this Insurance Plan. This is a non participating saving-cum-protection insurance plan. While there are some good features about this plan, I would provide more insights about the features of ING Guaranteed Income Insurance plan and its suitability to individuals. This article topic is based on request made by Satish on “Suggest-a-topic” on this blog.
About ING Life insurance company
ING Life insurance is private insurance company headquartered at Bangalore is 100% owned by Exide Industries. ING Guaranteed Income Insurance Plan is traditional life solution that offers a host of guaranteed benefits to customers and complies with the new product guidelines.
Key Features of ING Life Guaranteed Income Insurance Plan
- Guaranteed income of 11%, 12% or 13% during payout period.
- Guaranteed Tax free regular income.
- Guaranteed tax free lump sum at maturity.
- Full guaranteed death benefit even during premium payout period beyond premium payment term.
Benefits available in ING Life Guaranteed Income Insurance Plan
a) Surviving Benefit
Under this benefit, guaranteed income is paid to customer after the completion of premium payment term until maturity, provided the policy should be force and all due insurance premiums must be paid. Income generated through this plan is Tax free. Policy term available is 15, 20, 24 and 30 years. Below table indicates the premium payment term and payout terms.
b) Maturity Benefit
Sum Assured would be payable at maturity along with last payout of Guaranteed Income.
c) Death Benefit
In case of death, the highest of the following would be paid as per death benefit.
- 10 times of annual premium paid
- 105% of basic insurance premium paid
- Sum Assured
Death benefit can be opted and paid either of the following a) Lump sum or b) 110% of benefit would be paid in 60 installments
d) Income Tax Benefits
- Premium paid would be eligible for deduction u/s 80C
- Insurance proceeds at maturity would be tax free u/s 10 (10D)
Eligibility to apply for Guaranteed Income Insurance Plan of ING
Minimum age for entry:
- 11 years for 15 years policy
- 8 year for 20 years policy
- 6 year for 24 years policy
- 3 year for 30 years policy
Maximum age for entry: 55 years
Maximum age at maturity: 85 years
How does this plan exactly work – Illustrated with an example
Raju who is 30 years age can make an investment of Rs 50,665 of yearly savings for next 15 years, but needs money for his children education after 15 years. He takes this insurance plan for 30 years period for Rs 530,769 sum assured. Here is how it looks like:
1) Raju pays premium of Rs 50,665 per annum from 1 to 15 years period.
2) Raju gets Rs 69,000 per annum guaranteed income (13% of Sum assured) from 16 to 30 years period. No premiums payable during this period. He would utilize these proceeds for children education every year.
3) At the end of 30th year, Raju gets Rs 530,769 (Sum assured) along with guaranteed income last payout.
4) Total payout received by Raju is Rs 69,000 x 15 = Rs 10,35,000 + Rs 530,769 = Rs 15,65,895
I have done a quick math about the returns. The returns are computed after considering yearly premiums from 1 to 15 years and outflow from 16 to 30 years and final maturity benefit. The annualized returns worked out to be 4.21%. Means you can expect returns of around 4% per annum depending on the age of the person.
Returns Vs Guaranteed Income
Often everyone gets confused on Returns and Guaranteed Income
Returns: Returns are real returns what you are getting from your investment.
Guaranteed Income: This is only a payout made from the insurance company. These are paid from your investment + interest amount. If ING Guaranteed Income plan says 13% this does not mean that you are getting 13% returns. They are making payment of 13% of sum assured to you from 16th year to 30th year (as per above example). You need to consider your premiums paid + out flows and then compute how much returns you are getting on your investment.
Bharti Axa Life Secure Income Plan Vs ING Guaranteed Income Insurance plan
Last month Bharti Axa launched similar plan called Secure Income Plan. While the payout features are different, this plan also provides guaranteed income of 8% after a period (ING provides 11% to 13% after a period). Bharti Axa Life Secure plan provides approx 3.5% to 4% returns on the overall investment made apart from protection. Whereas ING guaranteed income provides 4%+ returns. Thought there is minor variation, ING Guaranteed Income insurance plan scores high comparing to Bharti Axa Secure Income Plan.
Conclusion: I am not excited with this insurance plan, if an individual is looking for fixed income after 8 to 15 years along with insurance coverage, one can consider this policy. Alternatively, you can choose term insurance plans and invest balance in low risk options like Bank FD or debt mutual funds to get higher returns.
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ING Guaranteed Income Insurance plan