Listen to this article
Time never stands still. As we move through various stages of life, our requirements and those of our families change consistently. We do our best to take care of changing needs of our family.
Also, we need to protect our family from the uncertainties of life. Tata AIA Life’s Guaranteed Monthly Income Plan provides financial protection for your family and a monthly income that meets tomorrow’s requirements.
Will this plan fulfill your future needs? In this article, let us evaluate this plan.
What are the pros(advantages) and cons(disadvantages) of this Tata AIA Guaranteed Monthly Income Plan?
We are going to do an IRR analysis, which will in turn prove whether the returns from Tata AIA Guaranteed Monthly Income Plan are good or bad against inflation.
Let’s get started!
Table of Contents
1.)A Summary of Tata AIA Guaranteed Monthly Income Plan – Analysis
2.)Features of Tata AIA Guaranteed Monthly Income Plan – Analysis
3.)Eligibility Criteria Analysis with Illustration – Tata AIA Guaranteed Monthly Income Plan
4.)Review of Benefits under Tata AIA Guaranteed Monthly Income Plan
- Maturity Benefit– Analysis with Illustration
- Death benefit – Review
5.)The grace Grace period, Discontinuance, Reduced paid-up & Revival of Tata AIA Guaranteed Monthly Income Plan – Review
6.)Free-Look Period of Tata AIA Guaranteed Monthly Income Plan _ Analysis
7.)Surrendering Tata AIA Guaranteed Monthly Income- Analysis
8.)Advantages of Tata AIA Guaranteed Monthly Income- Analysis
9.)Disadvantages of Tata AIA Guaranteed Monthly Income- Analysis
10.)Research Methodology Analysis – Tata AIA Guaranteed Monthly Income
11.)Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of Tata AIA Guaranteed Monthly Income
12.)Tata AIA Guaranteed Monthly Income vs Other Investment Products
- Tata AIA Guaranteed Monthly Income Plan Vs. Term Insurance + ELSS / PPF
- Tata AIA Guaranteed Monthly Income Plan Vs. Tata AIA Life Guaranteed Return Insurance Plan – Review
- Tata AIA Guaranteed Monthly Income Plan Vs. Tata AIA Life Insurance Value Income Plan
13.)Tata AIA Guaranteed Monthly Income Plan Vs. Other Investment Products – Review Conclusion.
14.)Final verdict on Tata AIA Guaranteed Monthly Income Plan – Good or Bad?
A Summary of Tata AIA Guaranteed Monthly Income Plan
Tata AIA Guaranteed Monthly Income Plan is a Non-Linked, Non-Participating Individual Life Insurance Savings Plan. It provides financial protection for your family and a monthly income that meets tomorrow’s requirements, thus helping you plan for your future needs and protection for your loved ones.
Features of Tata AIA Guaranteed Monthly Income Plan – Analysis
- You can choose a convenient Policy term – 5/8/12 years.
- You can receive guaranteed income for 10/16/24 years.
- Receive monthly income ranging from 8.35% to 13.03% per annum of total premiums paid.
- A larger Premium will boost or increase your monthly income.
- Enhanced protection with optional Riders is available in Tata AIA Guaranteed Monthly Income Plan.
- Tata AIA Guaranteed Monthly Income Plan is eligible for Tax benefits as per Section 80C and 10(10D) of the Income Tax Act, 1961.
Eligibility Criteria Analysis with Illustration – Tata AIA Guaranteed Monthly Income Plan
| Policy term in years | 5 | 8 | 12 |
| Premium paying term (in years) | 5 | 8 | 12 |
| Income term (in years) | 10 | 16 | 24 |
| Minimum entry age (in years) | 13 | 10 | 6 |
| Maximum Entry age | 60 | 60 | 55 |
| Maximum Maturity Age | 65 | 68 | 67 |
| Minimum Annualised premium | 75000 | 50000 | 36000 |
| Maximum Annualised Premium | No Limit | ||
| Basic Sum Assured | 11 times the Basic Sum Assured | ||
| Premium paying Mode | Annual/ Half Yearly/ Quarterly/ Monthly | ||
Review of Benefits under Tata AIA Guaranteed Monthly Income Plan
Maturity Benefit – Analysis with Illustration
Provided the policy is in force and all due premiums have been paid, a Guaranteed Monthly Income is payable in arrears during the Income Term, starting from the end of 1st month after the end of the Policy Term.
It is determined as a percentage of Total Premiums Paid, depending on the age at entry and the chosen Policy Term. The income term shall be,
| Policy term | Income Term |
| 5 | 10 |
| 8 | 16 |
| 12 | 24 |
Death benefit – Review
Death during Policy Term: Analysis
In case of death of the Life Assured during the Policy Term, provided the Policy is in force, “Sum Assured on Death” is payable to the Claimant. “Sum Assured on Death” means the highest of the following:
- 11 times the Annualised Premium;
- 105% of the total Premiums paid up to the date of death
- Guaranteed Sum Assured on Maturity;
- Absolute amount assured to be paid on death.
Death during Income Term: Analysis
In case of death of the Life Insured during the Income Term, all the future Guaranteed Monthly Income shall be payable to the Claimant.
The Claimant also has the option to receive the commuted value of the future Guaranteed Monthly Income payable in the form of a lumpsum at the time of death of Life Insured, discounted at 7.5% per annum.
The grace period, Discontinuance, Reduced paid-up & Revival of Tata AIA Guaranteed Monthly Income Plan – Review
Grace period – Analysis
A Grace Period of 15 days for monthly mode and 30 days for all other modes, from the due date will be allowed for payment of each subsequent premium.
Lapsed – Analysis
In case premiums are not paid for two full years, then all benefits under the Tata AIA Guaranteed Monthly Income policy will cease immediately.
Reduced paid-up – Analysis
In case premiums have been paid for at least two full years, then your Tata AIA Guaranteed Monthly Income policy will continue on a Reduced Paid-Up basis.
Under Reduced Paid-Up in Tata AIA Guaranteed Monthly Income policy, your sum assured and sum assured on maturity shall be decreased in proportion to the entire amount of premiums that are still owed at the end of the premium-paying term.
Revival – Analysis
You can revive your Tata AIA Guaranteed Monthly Income policy for its full coverage within five years after the first unpaid premium’s deadline by paying all outstanding premiums and interest at once.
Free-Look Period of Tata AIA Guaranteed Monthly Income Plan _ Analysis
You have the right to return your Tata AIA Guaranteed Monthly Income policy within 15 days (30 days in case the policy is issued under the provisions of IRDAI Guidelines on Distance Marketing of Insurance products) from the date of receipt of the policy.
Surrendering Tata AIA Guaranteed Monthly Income – Analysis
The Tata AIA Guaranteed Monthly Income policy will acquire a surrender value after all due premiums for at least two full policy years are paid.
The Tata AIA Guaranteed Monthly Income surrender value payable will be the higher Guaranteed Surrender Value or Special Surrender Value. Tata AIA Guaranteed Monthly Income Guaranteed Surrender Value (GSV) is equal to GSV Factor multiplied by Total Premiums Paid.
The special Surrender Value (SSV) of Tata AIA Guaranteed Monthly Income is equal to SSV Factor multiplied by Reduced Paid Up Factor multiplied by Guaranteed Sum Assured on Maturity.
Advantages(pros) of Tata AIA Guaranteed Monthly Income – Analysis
- The monthly income can act as a second source of income.
- A loan facility is available to a maximum of 80% of the surrender value.
- Income benefit is not interrupted due to the death of the policyholder, it just continues to the nominee.
- You have the flexibility to enhance your cover by adding optional riders to your base policy.
Disadvantages(cons) of Tata AIA Guaranteed Monthly Income – Analysis
- The income benefit is receivable on a monthly basis only. Annual mode is not available.
- Sum Assured is too low.
- You can’t enjoy the benefit of this policy in a lump sum amount (one-time benefit). Only a staggered payment option is available.
- The death benefit is available only during the premium paying term & it is not available during the Income term.
- The Income benefit is very meager & it is not adjusted to inflation.
Research Methodology – Tata AIA Guaranteed Monthly Income
Under Tata AIA Guaranteed Monthly Income Plan, you pay a premium on an annual basis. But the income benefit is receivable on a monthly basis.
Since the payment is staggered for a longer period, you need to figure out the Internal Rate of Return for this plan. This will help you to decide whether this plan is beneficial in terms of return.
In the next part of the analysis, The IRR is calculated for a benefit illustration taken from the Tata AIA Guaranteed Monthly Income policy brochure. (Refer here for Policy Brochure details and Premium Calculator).
The full calculation is not shown here, as the income term period is too long (24 years * 12 months).
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of Tata AIA Guaranteed Monthly Income
A 45-year-old male wishes to opt for Tata AIA Life Insurance Guaranteed Monthly Income Plan wherein he chooses: Sum Assured – ₹ 11 Lakhs, Policy term & Premium Paying term – 12 years, Annualised premium – ₹ 1 Lakh.
| Male | 45 years old |
| Sum Assured | 11,00,000 |
| Policy term | 12 years |
| Premium Paying term | 12 years |
| Annualised premium | 1,00,000 |
The annualised premium is calculated in the above illustration. If he pays the premium regularly for 12 years, he would be receiving a monthly income of ₹ 9,170 for the next 24 years. If we work out XIRR for this cash flow, it works out to be 4.71%.
This rate of return for such a long-term investment (12 years premium paying term + 24 years income term) is not beneficial.
Moreover, you receive the same Income benefit in the first year & also in the 24th year. By this time due to economic inflation, the income benefit would be minuscule.
Tata AIA Guaranteed Monthly Income vs Other Investment Products
You can invest the same ₹ 1 lakh in other investments which fetch you better returns. Moreover, liquidity is a big problem in Tata AIA Guaranteed Monthly Income Plan. In the initial stage, you can split the amount for life insurance premium & investment.
Risk-averse investors can choose debt instruments. Investors who are ready to take risks can choose equity instruments. Here we have taken both debt & equity investments.
Pure term policy for a sum assured of ₹ 11 Lakh would cost ₹10,100 p.a. So, you would be left with ₹ 89,900 p.a. for investment.
-
Tata AIA Guaranteed Monthly Income Plan Vs. Term Insurance + ELSS / PPF – Review
All the metrics are assumed similar to the Tata AIA benefit illustration.
| Pure term Insurance | |
| Sum Assured | 11,00,000 |
| Policy term | 12 years |
| Premium Paying term | 12 years |
| Annualised premium | 10,100 |
| Investment | 89,900 |
PPF: Analysis
PPF has a 15-year lock-in period with a minimum contribution (₹500). In the Tata AIA benefit illustration, the premium paying term is 12 years & the income benefits start in the next year. But here we made adjustments in the last 3 years in order to meet the lock-in.
The annual contribution of ₹89,900 in the first 11 years & ₹ 88400 (89900 less 500 per year for the next 3 years) in the 12th year & 500 in the last 3 years is made into the PPF account. The accumulated corpus at the end of 15 years is calculated at ₹ 21.28 lakhs.
ELSS: Analysis with Illustration
The annual contribution of ₹ 89,900 for 12 years is made into an ELSS fund. The accumulated corpus at the end of 12 years is 23.04 lakhs (post-tax value). Tax calculation is given below.
ELSS Tax calculation
| Maturity value after 12 years | 24,29,917 |
| Less | |
| Purchase price | 10,78,800 |
| Long-term capital gains | 13,51,117 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 12,51,117 |
| Tax paid on LTCG | 1,25,112 |
| Maturity value after tax | 23,04,805 |
In the above illustration, the Maturity value after tax is calculated at ₹23,04,805, now we shall move to the next part. Under the Tata AIA Guaranteed Monthly income plan, you start receiving income benefits the very next year of the premium paying term.
You receive a monthly income which is calculated at₹ 9,170, during your income term.
Similarly, we can invest the accumulated corpus under the PPF account & ELSS fund in Post Office Monthly Income Scheme (POMIS). The current rate of interest is 7.4% p.a. The maximum amount one can invest in POMIS is ₹ 15 Lakhs.
If you invest just ₹ 15 lakhs, you get a monthly income which is calculated at ₹ 9,250. You receive this amount throughout the tenure & at the end of the tenure, the investment amount of ₹ 15 lakh is returned.
We would like to highlight a point that, this Scheme offers better regular income than Tata AIA Guaranteed Monthly Income Plan.
Under PPF we have accumulated a corpus of ₹ 21.28 lakhs & under ELSS we have accumulated a corpus of ₹ 23.04 which can be split among your family members & invested (ceiling ₹ 15 lakhs per individual).
So, you get a higher income benefit than Tata AIA Guaranteed Monthly Income plan.
You will receive approx. 13,000 & 14,250 per month under PPF & ELSS investment respectively. Moreover, as we discussed earlier the investment amount is returned at the end of the tenure.
One more alternate option is investing the accumulated corpus in a debt mutual fund & withdraw a standard amount monthly using Systematic Withdrawal Plan (SWP). Here, you have the option to step up the income year after year to accommodate inflation.
This analysis clearly shows, if you need regular income there are better options than the Tata AIA Guaranteed Monthly Income plan.
-
Tata AIA Guaranteed Monthly Income Plan Vs. Tata AIA Life Guaranteed Return Insurance Plan – Review
‘Life Insurance guaranteed return’ is an individual, Non-Linked, Non-Participating Life Insurance Savings Plan whereas ‘Guaranteed Monthly Income Plan’ is a Non-Linked, Non-Participating Individual Life Insurance Savings Plan.
Tata AIA Life Guaranteed Return Insurance Plan: Review (2023) – Is It Good Or Bad?
Tata AIA Life Guaranteed Return Insurance Plan – A Detailed Review/Youtube Review/
-
Tata AIA Guaranteed Monthly Income Plan Vs. Tata AIA Life Insurance Value Income Plan
In the ‘Value Income Plan’ there is an Option to either take the cash bonus now or wait for it to mature each year before taking it.
Check out the complete review of the ‘Value Income Plan’ with illustrations and precise calculations.
Tata AIA Life Insurance Value Income Plan – Review (2023) – Is it Good or Bad?
Tata AIA Life Insurance Value Income Plan – Review – Is it Good or Bad? /Youtube Review/
Tata AIA Guaranteed Monthly Income Plan Vs. Other Investment Products – Review Conclusion.
As we Have discussed earlier,
For a lengthy investment (12 years of premium paying term + 24 years of income term), the rate of return offered by Tata AIA Guaranteed Monthly Income is not favorable. Additionally, you receive the same income advantage in both the first and 24th years. Due to economic inflation by this point, the income boost would be extremely little.
If you put ₹1 lakh into other investments, it will yield better returns. Furthermore, the Tata AIA Guaranteed Monthly Income Plan has a significant liquidity issue. You can divide the original deposit and life insurance premium payments.
On the whole, taking a Term Insurance and investing separately in PPF or ELSS is a wise option compared to Tata AIA Guaranteed Monthly Income Plan.
Final verdict on Tata AIA Guaranteed Monthly Income Plan – Good or Bad?
Tata AIA Guaranteed Monthly Income allows you to save for the future. It offers guaranteed income throughout the Income Term. Regular & guaranteed income is the only feature of this plan. But the return is not attractive to lock your funds for such a long period almost 36 years.
The same feature is available in other investments which fetch you better income & offers liquidity.
The Small Savings Schemes offer better returns than the Tata AIA Guaranteed Monthly Income plan. If you are comfortable with market-related products, you can opt for Mutual funds.
Like many policies in the bazaar, the agents may put the Tata AIA Guaranteed Monthly Income plan on your table & showcase the regular & guaranteed cash flow throughout the term, please beware that this is for their agent commission. You should be cautious & avoid these types of policies.
Social media sites like Quora, Facebook, Twitter, etc may have a lot of information about managing finances but do you think all of them are reliable?
A professional financial planner will have reliable answers to your queries and can provide you comprehensive financial plan.
Leave a Reply