Guaranteed Returns vs Assured Returns: Know the Difference

How life insurance can offer dual benefit of assured returns and protection

Insured, Insurer, payout, premium, nominee, these are some of the technical jargon often heard when searching to buy an insurance cover. Lack of information about such technical terms results in the individual choosing an inappropriate insurance policy as per their need. Also, some people get influenced by people whom they know to buy a plan without proper research.

Return agreements that a certain policy includes must be understood with utmost clarity to better evaluate the insurance policy suitable for oneself. Policies generally come with two different kinds of returns paid on premiums. These include the guaranteed return policy and assured return policy plans. While people may often commit the mistake of understanding the two as the same, these are structurally different from one another both theoretically and in a  practical sense.

Guaranteed Return Insurance Plan

A guaranteed return plan is best understood, as the name suggests. Under this plan, the policy remains unaffected by the bank’s financial status. Irrespective of the insurer’s position or bank’s financial health, the insured is subjected to receive a fixed predetermined amount in the form of money.

This sum is the minimum amount that the individual must be paid as per the guaranteed return policy, or in case the policyholder outlives the policy tenure. In addition to this, one can compare guaranteed return insurance plans online and decide which is the best plan of all. For example, one can check the Guaranteed Return Insurance Plan (GRIP) of Tata AIA life insurance policy plans and get your future secured. Similarly, one can check other policies as well and finalise the best guaranteed return plan.

Benefits:

  • Guaranteed return of money when the policy matures, irrespective of the insurance provider’s financial condition.
  • Higher returns with fewer risks involved.

Critiques:

  • Comes with a higher payable premium.
  • Return paid is usually less as compared to other policies to reduce the bank’s risk burden in the event of bankruptcy.

The listed details may help figure out whetherit is good to invest in guaranteed return plans or an assured policy.

Assured Return Insurance Plan

Unlike a guaranteed return insurance plan, an assured return plan pays off a fixed rate of return irrespective of the market’s financial volatility. However, an assured return plan is affected by the capital and financial status of the insurance provider. The insurance provider, on being bankrupt, is not liable to pay any sum to the insured as agreed by the insurance policy.

Benefits:

  • The right to challenge the bank in court in case the bank declares bankruptcy and denies payment of the assured return.
  • Possibility of increase in assured returns given that the life insurance’s policy value exceeds the tenure of the policy.

Critiques:

  • Risk of releasing assured returns if the insurance provider has an unstable track record.
  • High risks are associated when investing with a small or a beginner banking firm.
  • Greater chances of death claim being denied as learned from past records.

Conclusion

It is important to have a clear and sound understanding of the type of insurance policy one aims to purchase. Every policy is suitable for different individuals with varying backgrounds, incomes and needs. Educating oneself on the technicalities of the insurance sector before buying an insurance cover would help better address the difference between guaranteed returns and assured returns.

Leave a Reply

Your email address will not be published. Required fields are marked *