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"Sum Assured" Meaning in a Guaranteed Savings Plan

dateKnowledge Centre Team dateDecember 06, 2020 views134 Views
Sum Assured Meaning in a Guaranteed Savings Plan

The value of saving up money for the future has been embedded in our culture for generations. It makes one of the most important lessons we learn as we move into work and family life to secure our future. Also in ahead for a secure retirement where the saved up money will be a huge aid. Investing in your future by saving money can not only ensure a future that is free of hassle and financial worries, but it can also provide us with lifelong comfort and security, especially in moments of emergency. In simpler words, investing is more like saving up for a rainy day. Early investment will give higher return rates. Guaranteed savings plans are a great way to invest in yourself and a secure future for yourself and your family.

What is a Guaranteed Savings Plan?

In simple words, a guaranteed savings plan is a life insurance policy that helps you save money and protect your cash reserve in times of emergencies for specific goals or milestones for the future, such as your children's higher education, their wedding or a new business. One of the main highlights of a guaranteed savings plan is that it guarantees payable benefits upon maturity of the plan, provided that you have paid all the premiums.

It is also a reliable way to ensure a secure future for your family if you (the beneficiary's) untimely death by any means. This is especially applicable to those working in hazardous jobs or conditions where the risk involved is very high. It is highly advised for such workers to consider guaranteed savings plan to ensure a safe, secure and prosperous future for their family.

What are the benefits of a Guaranteed Savings Plan?

As stated earlier, the guaranteed savings plan is a life insurance plan which will allow you to accumulate a cash reserve for the future. Additionally, there are some specific benefits to choosing a guaranteed savings plan insurance policy over others. Some of the main benefits of the guaranteed savings plan are:

  • It guarantees life cover for the entire plan period even though you only have to pay premiums for a limited period.
  • It guarantees protection of life insurance to the beneficiary by making a lump sum upon death. In this way, there will be enhanced protection for your family.
  • The payment terms are quite flexible. You will be able to choose one that is suitable for you and your family's needs, as well one that you can afford or manage according to your unique financial circumstances.
  • There are many different policy term options to choose from according to your needs, wants and circumstances.
  • You also get the option to opt for a High Premium Booster to get extra benefits for committing to the higher premiums.
  • And of course, you also get tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.
  • The Sum assured that is paid upon maturity or an eventuality will be the highest amount of a range of options discussed below.

What is the Sum Assured in a Guaranteed Savings Plan?

The Sum assured is the total value of the insurance policy's insurance when purchasing it. Under any circumstances, such as a death, the Sum assured will be the amount that is paid by the insurance policy to the customer.

The Sum assured amount can vary from person to person. It usually depends on the yearly income of the customer. Generally speaking, the Sum assured is usually not more than ten times the customer's yearly income. It can also be between twelve and fifteen times the customer's yearly expenses, including the loans taken by them.

To be eligible for tax benefits, the Sum assured must be at least ten times the yearly premium.

What are the different options in a Guaranteed Savings Plan?

There are three main options to choose from in a guaranteed savings plan, each with its own set of benefits and specifications suited for different needs. You can select any one of these options:

  • Guaranteed Savings Option: This is a great option for those who want a life cover throughout the insurance policy term and want to receive the lump sum upon reaching maturity of the plan. The entry age starts from birth, and the maximum entry age is 60 years old as on the beneficiary's last birthday. The minimum maturity age is 18 years of age, and the maximum maturity age is 75 years old for this option.
  • Guaranteed Savings with Double Protection Option: This is a great option for those who want enhanced protection throughout the insurance policy term and want to receive the lump sum upon reaching maturity of the plan. For starters, the entry age is 18 years old, and the maximum entry age is 60 years old as on the beneficiary's last birthday. The minimum maturity age is 28 years of age, and the maximum maturity age is 75 years old for this option.
  • Guaranteed Savings with Premium Protection Option: Under this option, you can choose to enhance the protection for your family, and it is also a great choice for those who are looking to secure their children's future. For starters, the entry age is 18 years old, and the maximum entry age is 55 years old as on the beneficiary's last birthday. The minimum maturity age is 28 years of age, and the maximum maturity age is 75 years old for this option.

What are the different kinds of Sum Assured in a Guaranteed Savings Plan?

  • Sum assured on death: The value of the Sum assured on death will vary according to the plan that you choose within your guaranteed savings plan. However, it will be so chosen to be the highest of the following range of options as applied to your plan:

    1. An amount that is equivalent to eleven times the annualised premium.

    2. An amount that is equivalent to 105 per cent of the amount paid as of the customer's day or beneficiary's death.

    3. An amount that is equivalent to the guaranteed Sum assured on maturity, that is the Sum assured.

    4. The absolute amount that is to be paid upon death, which is also equivalent to the Sum Assured.

  • Accidental Death Benefit (ADB) Sum Assured: The Accidental Death Benefit (ADB) Sum Assured amount refers to the amount paid to the beneficiaries upon their death caused by accident. The amount that is the same as that of the Sum Assured on Death amount. This is especially beneficial for employees working in hazardous conditions or jobs.
  • Paid-up Sum Assured on Death: The Paid-up Sum Assured on Death is the amount paid after all the premiums have been paid and upon the death of the beneficiary. The amount is calculated as the Sum Assured on Death times the number of paid premiums, divided by the total number of payable premiums within the plan term.
  • Paid-up Sum Assured on Maturity: The Paid-up Sum Assured on Maturity is the amount paid at the maturity of the guaranteed savings plan after all the premiums have been paid. This amount is the Guaranteed Sum Assured on Maturity times the number of paid premiums, divided by the total number of payable premiums within the plan term.
  • Paid-up ADB Sum Assured: This amount is equal to the Accidental Death Benefit Sum Assured times the number of paid premiums and divided by the total number payable premiums within the insurance plan term.
  • Paid-up Guaranteed Loyalty Addition: This amount is equal to the Guaranteed Loyalty Addition amount multiplied by the number of paid premiums and divided by the total number of payable premiums within the insurance plan term.
  • Annualised Premium: This amount is defined as the payable premium in a year of your choice, which excludes rider premiums, the taxes, loadings for modal premiums (if any) and extra premiums underwriting extra premiums.
  • Total Premiums Paid: This amount is equal to the total sum of all premiums received, but it also excludes any rider premiums and tax amounts.

The minimum Sum assured amount is Rs. 76,500. There is no upper limit on the maximum Sum assured amount, and it is also subject to the company's underwriting policies. The minimum premium amount to be paid annually is Rs. 20,000. The minimum premium half-yearly is Rs. 10,200. The minimum premium amount quarterly is Rs. 5,200 and the minimum premium amount monthly is Rs. 1,800. Again, there is no upper limit on the maximum premium amount to be paid as it is also subject to the company's underwriting policies.

Mode Minimum Instalment Premium (₹) New regime
Annual 20,000 Maximum Premium: No limit (Subject to Board Approved Underwriting Policy of the Company)
Half-Yeraly 10,200
Quarterly 5,200
Monthly 1,800

As you have seen, there are many different sum assured iterations that you can choose from, and it varies from person to person depending on your annual income, annual expenses, number of premiums paid as well as their specific situation in life at the time of maturity of the guaranteed savings plan. However, it is clear that the Sum assured of your guaranteed savings plan is a smart choice to secure your future and that of your family. Take a step towards a better and worry-free future today.

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Frequently Asked Questions

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns if you invest in this savings plan. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

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If you are looking for a guaranteed income plan, then saving plans should be on your list of investments that you are planning to make. Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Saving plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These saving plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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Saving is the money that you keep aside for emergencies or for buying any big-ticket item. Investing means growing or multiplying the wealth that you have by buying savings plan, or any other assets. Buying a savings plan will help you in achieving your investment goals such as retirement, your child’s higher education or marriage, or for buying a new house.

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Smart Goals Plan is a savings plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals. Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide variety of saving plans that you can invest in as per your risk appetite and investment goal.

Which savings plan is suitable for girl child?

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child. Monthly Income Advantage Plans are also a good option if you are planning to invest in a savings plan for your girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having the best savings cum guaranteed income plan in your portfolio is extremely important. Savings plan ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

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A monthly income advantage plan ensures that you lead a stress-free life with your loved ones as it provides a life cover along with giving you guaranteed monthly income. In short, it is a life insurance and income plan that will financially secure commitments made to your loved ones. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income Advantage Plan is a monthly income advantage plan that provides life cover for the entire term while you pay premium only for a limited period.

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What is a good age to start saving money?

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Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. The best saving plan offers a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

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How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in an income plan, it always pays well to start early. The earlier you start investing in a savings plan, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested in the best saving scheme for a long time can give substantial returns due to compounding. Buy the best savings plan as soon as you start earning to achieve all your milestones on time.

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