Guaranteed & Non-Guaranteed Components of Life Insurance:
There are two important component in a Life Insurance Policy – Guaranteed & Non-Guaranteed, as an insured or proposer we should know clearly about the both components, it will help us to choose right insurance plan accordingly.
In every Life Insurance illustration and Policy Documents there is clearly mentioned both components, some insurance companies print it in BOLD, Highlight and Largest font who want to aware proposer at the proposal (initial) stage of contract and some print it in normal way as proposer can’t aware of that.
Sum-Assured or Death benefit is the Guaranteed component of every life insurance policy, it may be Term Plan, ULIP, Endowment, Money Back, Annuity or any type of the policy.
Bonus is Guaranteed component of every Participating Insurance Policy, but the percentage of Bonus is Non-Guaranteed component, as per IRDA rule, insurance companies have to show the tabular data at 4% and 8% but it’s not for sure that insured will get that printed amount, it may be higher or lower to the printed values, purely depends upon the %age of every year bonus accrued.
MoneyBack is the Guaranteed component of MoneyBack policies, percentage of the MoneyBack is fixed in each plan when it designed and approved by the IRDA. MoneyBack normally the fixed percentage of the Sum-Assured which will paid at pre-determined intervals during the Policy Term.
Annuity is guaranteed component in Traditional Plans but may varies in ULIP plans, so it’s not guaranteed in ULIP.
Surrender Value is Non-Guaranteed component in all Life Insurance Policies except Term Plan and there no surrender option. A Term Policy is benefit based policy you can lapse the policy but can’t surrender or cancel. Surrender Value again based on the accrued bonuses.
Maturity is Non-Guaranteed component of the Insurance Policy, as maturity depends upon the bonuses in all participating policies like Endowment and MoneyBack Policies. And it’s again non-guaranteed in ULIP also as depends upon the Units and NAV or can say depends upon the Fund Value which get affected by Market.
In Term Plan and ULIP, there is only Sum-Assured Guaranteed.
Next time whenever plan for Life Insurance proposal, think and ask your adviser about the Guaranteed and Non Guaranteed components of the presented plan, it will help you to take right decision as you might fulfill your future need by that insurance plan, like Child Education, Retirement Solution, Fund for Child Marriage etc.