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Monthly Income Plan

A monthly interest fixed deposit is the kind of investment when the interest earned is lined back into the investors account per month. This means that monthly investment plans are managed in such a way that the fixed-income goes towards a regular revenue while the equity gives the benefits. This is what makes a monthly investment plan so attractive for investment.

  • Fixed deposits that earn interest by the same process as a normal fixed deposit does with a few differences. The difference being that with an MIP, the investors have access to the interest earned on a monthly basis.

  • As of now, most of the financial institutes allow that depositors earn interest monthly from regular fixed deposits.

  • The monthly income plans are mostly linked to a savings bank account. However, this is not a necessary requisite.

Types of Monthly Income Plans

  • Dividend Based Monthly Investment Plan – In this, monthly payments go out in the form of dividends. This dividend gathered by Monthly Income Plans does not have taxes on them for the investor.
  • Growth Based MIP – Here, the profit made on the capital keeps getting added to the capital. Remember, that the return is not given to the investor at repeat intervals. Rather, it is given together with the capital upon unit redemption

Features of Best Monthly Income Plans

Monthly income plans given by the insurance companies are actually individual life insurance policies in which a regular income in the form of annuity is paid out upon the maturity of the normal life policy. This is broken into two components:

  • The monthly income.

  • The lump sum payment paid at the end of the policy payment period.

Read on to understand the full features of a Monthly Income Plan

Monthly Payment

  • A monthly income plan delivers a consistent payment option every month. This payment is certain and the insured person does not have to worry whether they will receive the amount due to them every month.

  • The payment is generally made in the form of direct bank deposit through the Electronic Clearing Service (ECS) option offered by all banks. This payment is made to the designated account of the policyholder. The insured can change the details of the account prior to the starting of payments.

Lump Sum Benefit at Maturity

  • These give returns at policy period’s end. This total return is optional most of the time since individuals can demand for the amount to be given as a part of the monthly benefit.

  • The reason insurance companies offer this payment as a onetime amount has to do with the nature of expenses in a normal individual’s life.

Insurance Cover

  • All monthly income plans from life insurance companies come with a life insurance cover.

  • Common plans deliver assured total together with declared bonuses of the company before due amount. Various schemes such as LIC monthly income plan, or schemes of other insurance companies give a higher sum equivalent of certain factors of the premium paid until date.

Bonus Amounts

The bonus amounts given in a MIP are given at policy end when the last payment is complete. Various schemes give the bonus to compound increment for many years giving the insured individual / nominee larger sums.

The bonus amount is of three types: reversionary, interim and terminal bonus.

  • Reversionary Bonus: This is an amount that is declared by the insurance company as a percentage of the sum assured. This is declared on an annual basis depending on the company’s yearly performance and adds on to the amount due at the end of the policy period of the monthly income plans.

The reversionary bonus consists of two types:

  • The simple reversionary bonus that does not add on to the sum assured and the
  • Compound reversionary bonus that adds to the sum assured.

In the latter case, the bonus for the next year is always more than the bonus for the previous year, provided the same percentage of bonus is declared.

  • Interim Bonus: This is declared in the interim period of calculation in the event the policyholder dies or policy matures, If declared, it adds on to the overall bonus sum the insured receives upon maturity of the policy or what the nominees would receive if the unfortunate comes to pass.

  • Terminal Bonus: Given by the insurance career policy’s end. It is given at the discretion of the company and mostly declared to show the insurer’s appreciation of the individual continuing with the policy and paying their premium on time over all these years.

Premium

  • Monthly income plan is inclusive of premiums including annual, half-yearly, quarterly, monthly, or lump sum amounts doled out by the insured to the insurance career.

Optional payment choices

Monthly plans mostly returns on the insured and nominee. Most plans give returns every month together with a lump sum payment option that comes after an interval of some months.

Some of the standard pay-out options are:

  • Monthly Pay-outs: This means that the insured or his / her nominees will receive a fixed sum every month.

  • Some of the insurance companies offer the option to pay a higher amount in the later part of the pay-out period to counter the effects of inflation or to provide a better source of income after the insured person has retired.

  • Lump Sum Payment: When most pay-outs come in monthly income form. Then this lump sum amount includes the bonus amounts that may have been declared by the insurance company.

  • In other cases, this includes a large sum than the monthly pay-out and is given to the individual to meet large expenses that may arise in the course of life, such as after retirement.

  • The best monthly income plans also offer the option to get this amount in stages every few years instead of as a single large amount at the end of the period.

What do you need to do before you buy monthly income plans?

  • Monthly income plans help the insured to get a guaranteed return for himself or his nominees, in the event of him not being around to provide for them.

  • Some things that one needs to consider before opting for a MIP are what are the returns they are looking at, the time period of the pay-outs and the premium, the type of income generation required if the unfortunate comes to pass, and so on.

  • Each factor will be influenced by the investor’s earnings, their present lifestyle and the future lifestyle they seek, the tax savings they want and so on. Let us look at what the investor needs to do before they buy a monthly investment plan.

Decide if you need monthly income plans

Monthly income plans help the insured to get a guaranteed return for himself or his nominees, in the event of him not being around to provide for them. Some things that one needs to consider before opting for a MIP are the returns they are looking at, the time period of the pay-outs and the premium, the type of income generation required if the unfortunate comes to pass, and so on. Each factor will be influenced by the investor’s earnings, their present lifestyle and the future lifestyle they seek, the tax savings they want and so on. Let us look at what the investor needs to do before they buy a monthly investment plan.

Check what your income will be when you retire

Monthly income plans help the insured to get a guaranteed return for himself or his nominees, in the event of him not being around to provide for them. Some things that one needs to consider before opting for a MIP are what are the returns they are looking at, the time period of the pay-outs and the premium, the type of income generation required if the unfortunate comes to pass, and so on.

Look at the insurance cover you have

  • An insurance policy protects more than the insured’s life.

  • It provides a host of other optional benefits that the person can ask for as riders. These may include accident and disability cover, critical illness rider and many more.

  • Besides, it provides security to the family in case the worst comes to pass. It may seem like a worn-out cliché but it is true that life is uncertain, whether people choose to realise it or not. If you are the only breadwinner of the family, it is imperative that you take steps to ensure you keep your family secure if they have to cope with life without you.

Benefits of Best Monthly Income Plan

The best monthly income policies offer a large number of advantages. From a secure income that you or your nominees will receive no matter what, to getting a large insurance cover at the same time, a monthly investment plan offers the best of both worlds to the investors. If for nothing else, people should also opt for these plans for their low risk profile. With market volatility being a part and parcel of the economy and likely to continue well into the future, these online money income options offer the investor a bankable policy that will hold good in times of need.

Guaranteed regular income

  • The best monthly income policies offer a large number of advantages. From a secure income that you or your nominees will receive no matter what, to getting a large insurance cover at the same time, a monthly investment plan offers the best of both worlds to the investors. If for nothing else, people should also opt for these plans for their low risk profile.

  • With market volatility as a part and parcel of the economy and likely to continue well into the future, these online money income options offer the investor a bankable policy that will hold good in times of need.

Get insurance cover

  • Monthly investment plans offer a specific cover for the insured, in addition to a number of optional add-on riders. This gives the insured parties and their nominees a safe and secure cover in case an unfortunate event comes to pass. Optional covers protect against any loss of income from critical illnesses, from an accident and disability or from loss of the policy due to the failure to pay the premium for any reason.

  • These are only a few of the optional riders available. Most insurance companies offer money income plans as a dual benefit policy for their customers – one which gives them a guaranteed monthly income and an insurance cover to boot. In addition, the cover from the best monthly income plans ensure the nominees receive the sum assured and / or the monthly pay-outs in the way they prefer.

Bonus amounts increase the overall pay-out:

  • The best plans including online money income policies offer bonus amounts, generally at the end of the plan period. This overall amount includes the reversionary bonus amount, the interim bonus, if any, and the terminal bonus amount. The reversionary bonus is declared by an insurance company at the end of each year as a percentage of the sum assured.

  • Even assuming a simple average of 1% simple interest bonus each year, a 20 years policy will provide the insured party a 20% bonus amount of the sum assured at the end of the policy period. The total bonus adds up to a significant amount and can be used by the insured to meet large expenses such as home renovation, children’s college fees and so on. This bonus amount is also paid to the nominees of the insured in case the unfortunate comes to pass.

Tax benefits reduce your overall pay-out:

  • The online money income plans as well as monthly income plans brought the traditional way offer tax benefits under section 80C and section 10(10D) of the Indian Income Tax Act. This implies your income is considerably reduced and if you are lucky, you are also able to get your income tax slab reduced to a lower tax slab on the rung.

  • Income tax assesses should do their tax calculations at length as the amount of premium, sum assured and pay-out have a large bearing on the amount of tax.

Best Monthly Income Plans 2018

The online money income plans as well as monthly income plans brought the traditional way offer tax benefits under section 80C and section 10(10D) of the Indian Income Tax Act.

This implies your income is considerably reduced and if you are lucky, you are also able to get your income tax slab reduced to a lower tax slab on the rung. Income tax assessees should do their tax calculations at length as the amount of premium, sum assured and pay-out have a large bearing on the amount of tax.

Bharti AXA Life Monthly Income Plan Plus

  • The monthly investment plan starts the pay-outs after the end of the premium payment period. The plan gives the insured the option to choose the monthly pay-out of their choice, which in turn determines the premium.

  • It offers reversionary bonus that is paid at the end of the policy period. The company provides a premium discount for monthly income plan with a longer term such as 20 or 30 years. Optional riders include accident death benefit, hospital cash and premium waiver.

Canara HSBC Oriental Bank of Commerce Life Insurance Smart Monthly Income Plan

  • The plan offers a life cover for the policy term of 25 years and a guaranteed monthly income for 15 years. The insured can go ahead to set off the payment receivable against the premium due from the eleventh to the fifteenth year.

  • The sum assured is 100 times the monthly income opted for by the insured. The plan offers annual bonuses and a final bonus.

Max Life Monthly Income Advantage Plan

  • The Max Life Monthly Income Advantage Plan offers monthly pay-outs over a 10-year period with the amounts in the last five years being double the amounts given in the first five. The payments start right after the premium payment period ends in this online money income plan.

  • The policy also offers a guaranteed terminal benefit that is paid at the end of the pay-out period and offers the insured party the flexibility to get the whole amount as a lump sum.

MetLife Monthly Income Plan – 10 Pay

  • The company offers a monthly income plan that pays for 15 years. The plan has a 10-year premium payment tenure.

  • It offers a reversionary bonus in addition to the insurance cover for the individual. The plan can be purchased through an advisor or from the company’s branch and offers a monthly income from Rs. 1,500 to Rs. 1 lakh.

FAQs on Monthly Income Plan

What is the pre-buying checklist for monthly income plans?

  • Asset Allocation
  • Dividend
  • Post Tax Returns

Difference of aggressive & conservative Monthly Income Plan

Aggressive MIP invests up to 30% in the equity and remaining 70% amount in the debt instruments. Conservative MIP invests up to 20% in the equity and remaining 80% amount in the debt instruments.

How are Monthly Income Plans Taxed?

An Indian MIP is a debt scheme for taxation object. Tax laws apply this system to any fund that invests less than 65% of its assets in stocks

What are the Highlights of MIP?

  • Debt mutual fund scheme
  • Invests a small part of the funds in equities.
  • Gives good income in the form of periodic returns.
  • Can be volatile.

What are the limiting factor of monthly income plan in Mutual Funds?

In the Monthly Income Plan the monthly income, however, is inconsistent as it depends on market conditions.

Benefits of Best Life Insurance Monthly Income Plan?

Receive income every month for 10 years once your premiums are complete.

Documents required to open Postal MIP account?

  • An account opening form. You can get it from your nearest post office, or you can download it here.
  • Two passport-size photographs.
  • Aadhaar
  • Driver’s license
  • Voter ID
  • Passport
  • Ration card
  • PAN card
  • Declaration in form 60 or 61 as per the Income Tax Act.

Why should invest in MIP?

Seasoned Investors believe that Monthly Income Plans are great for conservative investment and retirees. MIPs invest most of their collection towards debt.

What is a post office monthly income scheme?

Post Office Monthly Income Scheme is one in which you invest a certain amount and earn a fixed interest every month.

Is monthly income scheme taxable?

The amount invested in POMIS is not tax deductible. When monthly pay outs do not undergo withdrawal, they become dormant and fail to yield interest. The post office MIS has no TDS.

Can get monthly interest fixed deposit?

Remember that the interest paid on a fixed deposit is given either monthly or quarterly as per investor's preference.

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