A guaranteed return plan — a form of savings plan with life insurance coverage — can be considered a decent investment avenue in today's scenario, Vivek Jain, Head, Investments, Policybazaar.com, told CNBC-TV18.com. Investors looking for a long-term investment with a moderate risk appetite should invest in these and build a decent size corpus for their future, he said.

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With several insurance companies offering multiple types of policies with numerous benefits, it has become easy for people to plan for financial stability, including a life cover and a maturity income without much market-related risk attached to it. Guaranteed return plan is one of such options that can help people get guaranteed returns along with protection. The USP of the plan is that one can invest a regular premium for a fixed tenure and on maturity can receive the income yearly, half-yearly, quarterly or monthly.

How it works?

In this plan, policyholders need to pay a fixed premium on a monthly or yearly basis during the plan's tenure. After the policy matures, they start receiving guaranteed returns on their investments. The payouts are for a predetermined period and the policyholder can receive the amount either on a monthly, semi-annually or annual basis. Typically, the guaranteed amount is fixed at the time of purchase of the policy from the life insurer.

The returns

"These plans give the best-in-class returns of up to 7.5 percent and are completely tax-free for a premium of up to Rs 5 lakh annually," Jain said.

Here’s a lowdown on guaranteed return plans to help investors devise their tax-saving and fund-growth strategy:

However, Jain pointed out that these kinds of returns might not last forever. The returns are captivating now due to some of these factors:

Fall in government security rates

Indian government security rates are going down with sweeping tides of market volatility. Hence, Jain believes, that the returns on 10-year G-Secs will also shrink in the long run. These plans yield even higher returns than traditional instruments like fixed deposits (FDs), Public Provident Fund (PPF), National Savings Certificates (NSCs), etc.

Tax status

India is already the fastest-growing economy in the world. As it becomes a developed nation, Jain thinks it will gradually decrease its tax exemption threshold to expand the country’s income tax base.

"This implies that tax benefits across asset classes will go away," he told CNBC-TV18.com.

Additionally, these plans come with an in-built life cover of 10 times the annual premium paid out to the dependents in case of the policyholder's unfortunate death. Therefore, Jain suggests investors to lock their guaranteed tax-free return for the long term and make the best use of this insurance- cum- investment plan while the opportunity lasts.