With the stock markets taking a plunge, insurance companies are now launching guaranteed return products. Though this is not new, the strtegy reflects a complete u-turn from the position when Insurance companies fought shy of guaranteed products and were going whole hog in promoting unit-linked insurance plans (ULIPs).

However, with financial market uncertainty prospective customers are confused about the available investment optionsas they seek products that not only offers complete protection of capital but also assures a reasonable rate of return.

Public sector giant Life Insurance Corporation of India has now announced the launch of Jeevan Aastha, a closed-ended single premium product which offers guaranteed benefits to customers on maturity and death.

The plan offers a guaranteed addition of Rs100 per annum for every thousand of the maturity sum assured for a 10-year term and Rs90 per thousand for policies with a 5-year term.

Policy holders can enjoy risk coverage equal to the basic sum assured, which would be six times the maturity sum assured, plus guaranteed additions in the first year of the policy.

In case of death after the first year, double the maturity sum assured, along with a guaranteed addition, would be payable. However, incase of death in the last year of the policy, twice the maturity sum assured along with guaranteed additions and loyalty addition, if any, would be paid to the nominees.

The minimum risk coverage for the first year, i.e. the basic sum assured that can be availed of is Rs1.5 lakh. There is no upper limit to this. Once the policy term is over, the maturity sum assured along with the guaranteed additions and loyalty additions, if any, will become payable. However, loyalty addition at the discretion of LIC.

Income-tax benefits under Section 80C and Section 10 (10D) are available under the plan.  As the first year's insurance coverage is more than five times the premium paid, the single premium paid under the policy is exempted under Section 80C and deducted from the taxable income.  However, overall limit of Rs1 lakh shall remain. In addition, the maturity amount under the plan shall also be tax free.

The compounded rate of return without income-tax benefit for 30 years old person for a 5-year term is around 7 per cent and for 10 years term shall be around 7.5 per cent.  The returns with income-tax benefit can be around 11 per cent.
 
And if you need a loan for anything, you can raise one after completion of one policy year. You may also assign the policy. The policy does not bind you and in case you want to surrender it, you can do so in terms of cash on the completion of one year. The surrender value would be discounted value of maturity sum assured and accrued guaranteed addition but in no case less than 90 per cent of the single premium paid, excluding all extra premiums.  There is a free-look period, too. It means that you can also return the policy within 15 days if you are not satisfied with the terms and conditions of the policy.