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What do Saving Plans Do Not Cover?

dateKnowledge Centre Team dateJanuary 12, 2021 views130 Views
What do Saving Plans Do Not Cover?

Uncertainties are inevitable in life. However, you can stay prepared to face them with a savings plan. A savings plan is a life insurance policy that prepares you to meet unexpected future events, whether they concern you or your loved ones. A guaranteed savings plan enables you to make disciplined and periodic savings to achieve the long-term and short-term financial objectives of life. Furthermore, a guaranteed savings plan also provides additional tax benefits for their life insurance components, terminal illness, and death benefits, among many others.

Need for having a Saving Plan

Proper financial planning is the key to fulfilling your dreams and aspirations. Access to the large corpus in the future by dint of systematic saving and investment done at the time. Today's need to live a good and happy life has outgrown, and stashing money under the bed won't compel the needs. A savings plan is the need of the hour because:

  • Regular Savings - by paying the premium account's regular payment to keep your savings plan active, a habit of saving is developed.
  • Guaranteed Returns- guaranteed returns are assured in a guaranteed savings plan which sets it apart from other investment options where no guarantee is there.
  • Bonus- Saving plans are long-term-investment, insurance companies offer various bonus options as an incentive for providing long-term stable funds.
  • Tax Benefits- Under Section 80C of the Income Tax Act, 1961, the premium paid for saving schemes qualify for a tax deduction. These tax benefits are provided under a guaranteed savings plan.
  • Loan- It is easy to avail of secured loans against the policy as the investment and fund accumulate under the savings scheme.
  • Life Covers- You receive a life cover with a savings plan that may not be as high as term insurance, but it still provides an additional layer of financial security to the family.
  • Unforeseen spending- You never know when an urgent situation will take place. An emergency doesn't come beforehand. You never know when an emergency can put a dent in your finances. A vehicle accident, a severe illness, emergencies at home like fire, or any other calamity can necessitate considerable out-of-pocket costs. These uncertainties of life can damage even the budget of most financially disciplined people. Nevertheless, a saving account can almost always cover the gaps and help you out of debt.
  • Leveraging Chances- A proper savings plan enables you to take advantage of possible profitable monetary opportunities. Not having sufficient money to invest may cost you excellent business opportunities, and these opportunities don't come beforehand, so preparing well in advance can benefit you.
  • Extra Security: if the bank suddenly goes bankrupt and closes, the government will substitute your funds up to a certain amount. More or less, your money is secured in a saving account. And if you invest in an interest-bearing saving account, you can also earn some interest benefits.
  • Make Money Work for You- Where everyone is working for money, make money work for you if you can open a high-interest saving account. Your money will be making more money by being just there. The more investment you make on your savings, the more interest you are likely to get.
  • Emergency Funding- One of the most important and necessary reasons to have a savings account is that you can access money during emergencies like any natural disaster when your pocket goes out of cash.
  • Retirement- A saving fund can be an essential resource to boost your quality of life after retirement and a fair and guaranteed savings plan can enable individuals to retire early.
  • Housing & Education- Enough saving funds can fulfil your small and big necessities of suitable housing. It can also help families in the long-term by providing funds for college educations and private schools.

What is and isn't covered?

Saving plans is a kind life insurance plan that provides financial protection to the family in cases like sudden death or the permanent disability of the family's central earning member. Take a look at what does is covered and what is excluded:

Covered

Along with the standard coverage, which varies from plan to plan, you can further enhance the protection with the help of riders such as:

  • Accidental death benefit rider: if the insured happens to die in an accident, the nominee gets this financial benefit along with the sum assured.
  • Accidental Total and permanent disability rider: Insured gets financial assistance if they cannot earn due to some disability mentioned in the policy.
  • Critical illness rider: major critical ailments like cancer, heart attack are covered under this rider.
  • Hospital cash rider: in case of any hospitalization, a fixed amount is paid to meet non-medical items' expenses.
  • Waiver of premium rider: the company waives off the remaining premium payment on the insured's sudden demise or total permanent disability if the insured has this rider.

Not covered

Along with all the riders, the insured must check what the policy does not cover. Here are some typical claims that are excluded by the insurance companies-

  • Almost all policies contain a clause relating to death related to the policyholder's participation in a crime. If the beneficiary claims for the amount, but it has arisen due to any unlawful activity, for instance, if someone robs a bank and gets killed during a robbery, their life insurance coverage would not pay out their beneficiary.
  • Almost all policies do not cover any claims if the policyholder is involved in self-inflicted surgery or deliberate self-harm.
  • Suppose the policyholder dies in certain activities like paragliding, water-sports activities, rock-climbing, etc. In that case, the beneficiary won't receive the death benefit.
  • Some insurance companies deny the claim if it is a human-made disaster or damage caused due to negligence on human beings.
  • Some policies don't cover the policyholder's loss of life due to HIV and STDs as a rider, and thus no benefits will be given to the beneficiary.
  • If the policyholder dies within the contestability period - a time after the policy goes into effect when the insurer can review the application for fraud- and discover that the policyholder has misrepresented or misguided the application. Then, the beneficiary's claim can get denied or sometimes the money may reduce to the amount of money owned in premiums.
  • The policy ends after a set number of years outlined in the policy's term, and once it expires, the coverage will no longer stay in effect.

Advantages of a Saving Account

A saving account is your future finance helper and a solution to most of the problems related to money that are inevitable for making low money. Here are some advantages of a saving account that might resolve all your doubts and confusions about investing in it-

  • Start with a little - there's often no minimum balance required to open a saving account. You are often free to deposit any size of money as you like.
  • An Automatic Saving Plan- an automatic savings plan automatically transfers a small portion of your paycheck into your savings account when you get paid.
  • Joint Accounts- you and your partner can save together for the future with joint accounts.
  • Easy Access- you can easily access your money in saving accounts through ATM cards, mobile apps, online banking, and at multiple bank branches opened by the bank.
  • Earn interest- financial institutions pay interest in your saving account balance, and many accounts offer compound interest. Make your money to earn more money.
  • Free to Open- Almost all saving accounts are free to open; they cost zero rupees and even don't have a monthly fee.
  • No lock-in period- you are free to switch saving accounts as often as you like.

Disadvantages of a Saving Account

It is essential to learn the disadvantages of savings accounts for better consultancy and a convenient policy operation.

  • Not fixed Rates- one major key disadvantage is that saving account interest rates are variable. It means that the financial institutes can set and change interest rates as per their wish.
  • Undeniable temptation to spend- Saving accounts are accessible anytime. While it's nice to have the freedom and generate that urge to spend money, if you're tempted to dip into your savings, then a time deposit can be the solution.
  • Six-withdrawal limit- saving accounts are limited to six withdrawals per month. If you withdraw more than six times, a penalty fee will be charged per transaction. However, it varies from bank to bank.

A better closeup to what a savings plan does and does not cover may explain how the whole process is done. When and on what conditions the beneficiary can avail of the money. Knowing all such essential details is crucial to avoid all the hectic and chaotic situations that may arise due to a lack of knowledge, which mostly leads to false claims.

A guaranteed savings plan plays an extensive role in maintaining life expectancy when you don't have money in your hands. One must know how a savings plan works, what it does not cover, and the benefits one can receive from it.

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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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