A guaranteed return plan is an attractive product that guarantees reasonable returns in unpredictable conditions. It is beneficial to small businesses because it allows them to invest their money safely and avoid market fluctuations. This plan is more suitable for conservative business owners because it provides a predetermined level of return on investment over a given time horizon and includes life insurance.
At maturity, the returns are guaranteed, irrespective of market fluctuations, which makes it useful in planning for a business’s future and helping it achieve its objectives. Scroll below to learn more about this insurance plan.
Features of Guaranteed Return Plans for Small Businesses
The following are the crucial features of a guaranteed returns investment plan for small businesses in India:
- Assured Returns: Such plans guarantee a steady inflow of revenues over a specific time, which can be received as a one-time payment or as short-term, long-term, or instant payments. This assists in achieving business objectives such as increasing operations, procuring better machinery, or setting money aside for future requirements like retirement.
- Flexible Return Options: You can choose how to receive the guaranteed amount based on your business needs. Whether it is a lump sum for quick investments or a steady income for long-term financial stability, the plan adapts to your goals.
- Bonus Benefits for Growth: If you choose an endowment plan, a certain percentage of the assured benefit is reinvested and added to the total benefits as the policy matures.
- Life Insurance Coverage: These plans also provide life insurance protection, ensuring that your business and family are secure in case of unforeseen events.
- Convenient Premium Payment: The plan enables you to pay premiums in different ways, either annually, biannually, monthly, or quarterly. It provides the comfort of matching your cash flow patterns.
What Does a Guaranteed Return Plan Include?
Guaranteed return plans combine life insurance with savings, offering both financial security and growth. Here is what small businesses can expect from such a plan:
- Natural Death Benefit: If the insured dies from any cause, whether disease or accident, the nominee receives a death benefit to support the family.
- Critical Illness Benefit: Some guaranteed return plans include critical illness benefits, which assist with the exorbitant costs of severe ailments and treatment and offer financial protection during hard times.
- Accidental Death Benefit: If the insured person dies from an accident, the plan also offers an extra amount to cushion the family financially.
- Loan Benefit: The plan enables the policyholder to get a loan of between 70-90% of the surrender value, thus creating a quick source of funds for the business.
What is Excluded in the Guaranteed Return Plan?
Although a guaranteed return plan provides security, it has certain exemptions, so everything is clear regarding the plan. Here are the key exclusions for small businesses:
- Suicide Clause: Suicide is defined when the insured dies within the first year of the policy, and the insurer will refund the premiums. No death benefit is paid if suicide takes place within a year of reviving the dormant policy. The insurer is free to refund 80% of the premiums paid or the surrender value, whichever is higher, to support the family.
- Adventure Sports and Risky Activities: The plan does not include deaths caused by taking part in risky activities such as sporting activities that involve risks like parachuting and bungee jumping, among others, since it aims to cover more probable hazards and does not in any way attach itself to dangers related to certain hobbies or practices.
Factors to Consider While Choosing a Guaranteed Return Investment Plan for Small Businesses
Here are some essential factors you must consider while choosing a guaranteed return investment plan for small businesses:
- Assured Returns: Assess the surety of returns provided by various plans. It is important to compare rates offered across different options to ensure they are consistent with the business’s set financial goals.
- Policy Duration: Consider the policy term. Choose a term appropriate to the business goals and the time required to achieve them.
- Premium Affordability: Make sure the premium is within your budget so it does not strain your business’ finances.
- Maturity Payout: Review the maturity benefit provided. Understand how much you will receive at the end of the term, including guaranteed payouts and any additional bonuses.
- Death Benefit: Ensure the death benefit is sufficient to cover your business and family’s financial needs in case of your unexpected passing during the policy term.
- Riders and Add-ons: Check for extra features like critical illness or accidental death coverage. These add-ons can strengthen your overall financial protection.
- Liquidity Options: Understand the plan’s liquidity. See if partial withdrawals or loans are possible during the policy term, and be aware of any restrictions or penalties for early withdrawals.
- Tax Benefits: Familiarise yourself with the tax advantages during the policy term and upon maturity. This can help optimise your financial planning.
- Insurance Provider’s Credibility: Choose an insurer with a strong track record, especially regarding claim settlements and customer service.
- Exclusions and Limitations: Review the policy exclusions to clarify what situations or events are not covered.
- Flexibility: Look for flexibility in premium payments, coverage adjustments, and other policy features that can adapt to your evolving business needs.
A guaranteed return investment plan provides small businesses with a powerful, safe and profitable financial instrument with guaranteed rates of return. This type of financing is suitable for business owners who want to avoid uncertainty with their investments but achieve long-term financial objectives. Fixed returns and life coverage ensure that your business’ funds are grown safely over some time.
