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What are the Key Eligibility Conditions of a Savings Plan?

dateKnowledge Centre Team dateJanuary 18, 2021 views174 Views
What are the Key Eligibility Conditions of a Savings Plan?

It is always well-advised to buy a guaranteed savings plan for yourself to take care of your family's future in the case of your untimely demise. Even after your death, there will be exorbitant expenses that your family might have to shoulder, like a child's education or marriage, or taking care of your spouse's retirement and making sure nothing goes awry for your family in the future.

The savings plan that you choose should cover your specific needs and have the criteria that you will meet to ensure maximum returns. It should suit your particular economic background so that you will regularly reach your objective without missing any premium payments.

It would be best if you also considered economic factors like inflation and a rise in costs for education, marriage, and similar enormous additional costs. Ideally, there should be an incremental interest that will ensure that your family will get covered securely.

An ideal savings plan should also provide a compensation/death benefit that can take care of your family if you die an untimely death. There should be additional drivers if your death were accidental or due to the sudden onset of a dangerous disease.

Canara HSBC Oriental Bank of Commerce Life Insurance offers a guaranteed savings plan giving you a guaranteed maturity benefit, lifelong coverage and enhanced protection that will be more than enough to meet your family's needs after you have passed away.

Are you Eligible for the Guaranteed Savings Plan?

There are certain critical eligibility conditions according to which you will be given a customized savings plan to pay premiums.

The company also considers all the risk factors including habits– such as smoking, drinking, history of drug addiction, pre-existing chronic health conditions like diabetes or high blood pressure, genetic conditions that may reduce the length of your life.

Entry Age

Your entry age is the minimum age at which any person will be allowed to open and work with an independent savings bank account. Individual banks will keep it given their risk management systems, which is why there is usually a fixed limit in terms of age. Ideally, a person above 18 years of age would be a perfect candidate for a savings account, primarily because a child below eighteen cannot legally sign documents or provide consent. But there is always the option to start an account in your name and later give the child ownership.

Plan Options Minimum Entry Age Maximum Entry Age
Guaranteed Savings Option 0 years 60 years
Guaranteed Savings with Double Protection Option 18 years 60 years
Guaranteed Savings with Premium Protection Option 18 years 55 years

As seen above, there are different plan options for which the upper and lower entry age limits vary.

For the first guaranteed savings option, the minimum entry age is 0 years. This means that you can take an account for your child as soon as they are born and begin saving up right from that moment. This will ensure that they will get a more considerable sum of money by growing up. The maximum limit for this plan is sixty years, beyond which it is unlikely that the person will survive for that long.

The guaranteed savings plan with double protection option is available only to 18 years of age or above. This means that they will have to consent to and open the bank account. The upper limit to this savings plan is 60 years of age.

The guaranteed savings plan with a premium protection option also mandates a minimum age of eighteen, but the upper limit is 55.

The age calculated is taken to be how old you or your nominee is as of the last birthday.

Maturity Age

The maturity age is the age at which the plan matures, and the nominee is eligible for the amount of money. The maturity date is when the total life insurance policy money is payable to the nominee by the insurance company. This can be either death or contract stipulation. It also implies that the cash value and death benefit amount are now equal. You will no longer have to pay any premiums, and most plans cover you for a few years after the maturity age as well.

Here is a tabulated list of the maturity age for Canara HSBC Oriental Bank of Commerce Life Insurance:

Plan Options Minimum Maturity Age Maximum Maturity Age
Guaranteed Savings Option 18 years 75 years
Guaranteed Savings with Double Protection Option 28 years
Guaranteed Savings with Premium Protection Option 28 years

As you can see from above, in the case of the first plan option – the guaranteed savings option, the minimum maturity is 18 years of age. Using this plan, you can start saving when the child is born until they are of 18 years of age, at which point the plan can mature and provide him or her with a specific amount of money.

The minimum duration of the remaining plans in a decade is why it is 28 years minimum age maturity for both the guaranteed savings with double protection option and premium protection open.

The maximum maturity age for all of the above plans is 75 years of age. This is usually the age at which most Indians retire or have already retired without a stable income. Since the average life expectancy of an Indian citizen is also around that age, this is an ideal upper limit for maturity.

Premium Paying Term

The total number of years you have to pay the premium determines your policy's length and coverage. This is different from the available policy term, which will make use of the available amount compounded from all your premiums to cover decades more from the date of your age of maturity. It is understood that the more extended coverage you have after your maturity age, the higher the amount of premium you will have to pay during the premium payment term, especially if the latter period is stretched over a shorter time.

Premium Payment Term (in years) Available Policy Term (in years)
5 10,15
7 12,15
10 15,20

If you choose to pay your premium payment for 5 years, you can have an available policy term for either a decade or an extended amount of 5 years more. If you choose 7 years as a premium payment term, you can benefit from 12 and 15 years. If you pay your premiums for 10 years, the available policy term can be extended to a minimum of 15 and a maximum of 20 years. The availability of this policy term will depend on the maturity age, in the sense that it should be within a lower limit of 18 and an upper limit of 75 where both limits are inclusive.

Premium Payment Mode and Modal Factors

The modal premium of any policy is the sum you will have to pay for each premium. The more considerable the amount for each modal premium, the fewer times you will have to make payments throughout the policy duration.

Regardless of this distribution of money throughout the policy, the long-term benefits remain the same. The way the money is spread throughout will depend entirely on your choices and how much you can afford to pay each time and how long you have to secure your family's future. This flexibility allows people from diverse economic backgrounds to secure saving plans.

The modal factor is used to convert annual premiums into smaller premiums that are paid with more frequency. For example, if the modal factor is 0.09, we can multiply it with the annual premium to figure out how much you will have to pay each month. The policyholder can always choose to change the premium payment mode subject to the modal factor application.

Mode Mode Factors
Annual 1.00
Half-yearly 0.51
quarterly 0.26
Monthly 0.09

Sum Assured

The minimum sum assured for the guaranteed savings plan is Rs. 76,500, which is usually sufficient for the average Indian household with reasonable expenses. The plus-side of a savings plan is there is no maximum sum assured – adding to the minimum assured sum and depending on how much money you can set aside for each premium and how frequently you can afford to invest in the savings plan.

There is, however, a minimum instalment premium – annually, you will have to pay a minimum of Rs. 20,000, calculated with the modal factor, can be distributed across the year as either a biannual sum of Rs. 10,200, a quarterly amount of Rs. 5,200 or a monthly sum of Rs. 1,800. There is no maximum premium limit, which means you can save as much as you want with this plan, the benefits you and your family can enjoy later in life!

Your eligibility for this guaranteed savings plan depends entirely on your health conditions, age, socioeconomic background etc. If you survive till the policy term is completed and all the premiums have been paid at that point, you will be eligible to receive a guaranteed sum, a yearly addition and a loyalty addition, after which there will be no further benefit.

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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.

Who should invest in a Savings Plan?

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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What is the difference between saving and investing?

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.

Which savings plan is best for retirement?

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement. Also, Guaranteed Income4Life is also another savings plan that you can consider for building your retirement corpus as it acts as a guaranteed income plan that will provide you maturity benefits to manage your post-retirement expenses.

Which savings plan is best for long-term goals?

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.

What is a monthly income advantage plan?

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?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding in a savings plan. Invest in an income plan as early as possible to build a significant corpus that will later help you in life. Ensure that you buy the best saving plan in India that can be aligned with your investment goals.

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?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner. Buy a monthly income advantage plan that will generate a steady source of income for you to take care of both long-term and short-term financial goals.

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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How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Buy the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment. Consider investing in a monthly income advantage plan to assist you in fulfilling your financial goals.

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How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits, which makes them a good investment choice for investors looking for income plans.

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