Investing in a savings plan is taking a step ahead in securing your family’s future. Buying a savings plan not only improves your savings habit but also adds value to your saved amount as well. But before buying a savings plan, you must know the features it provides to make a better decision.
Here are the top features of a savings plan that you need to know before you look to buy the plan.
i. Guaranteed Maturityii. Death Benefitiii. The flexibility of premium paymentiv. The flexibility of policy and premium payment termv. Premium protection or goal safetyvi. Tax-savingsvii. Additional riders or insurance coversviii. Borrow against the policy
1. Guaranteed Maturity Benefit
Guaranteed maturity benefits are an important feature of savings plans. That is you are assured to receive a certain amount at the policy maturity. Knowing that you will receive a guaranteed maturity benefit gives you a sense of financial security.
Since you know you will be getting a return, you can focus on just completing your part which is paying the premiums in time. The maturity benefit in the savings plan depends upon the following:
Type of Savings Plan
- Guaranteed savings plans have cash bonuses added to the policy value.
- ULIP saving plans add bonus units to your portfolio and the final value will depend on the fund performance.
Tenure of Premium Payment
You may receive a higher bonus for the 15-year premium payment term than the 10-year term.
Tenure of Investment (policy life)
A policy running uninterrupted for 20 years will receive more benefits than a policy running for 15 years.
Timely Premium Payment
This is important to keep your policy in force and avoid discounting of the bonus additions.
Life Cover or Death Benefit
Apart from the maturity benefit. The savings plan also provides life coverage as well. This life cover is provided for the entire term despite paying a premium for a limited term.
For example, in Guaranteed Savings Plan, savings plan of Canara HSBC Oriental Bank of Commerce Life Insurance, you pay a premium for 5 years, then you can avail the policy term of up to 10 years. Life cover plays an important role in protecting your loved ones and helps in fulfilling their goals in case of your untimely demise. As the case with maturity benefit, you need to complete your
3. Flexibility of Premium Payment & Policy Terms
A savings plan gives you full flexibility in terms of
A. Premium Payment Methods
You can choose your policy term, frequency of payment as per your needs in a savings plan. You can pay your premium monthly, quarterly, or even annually.
For example, if you are a salaried individual, you can plan out your premium monthly. If you have a business or don’t have a regular income you can try the quarterly payment method. Also, you can choose between regular pay as well as limited pay mode.
B. Choose a Suitable Policy Term
A savings plan term is not fixed. It can be short-term, medium, or even long-term, like the way you want it to be. You can choose the term that best matches your goals and vision.
For example, a Guaranteed Savings Plan offers various terms. These are of 10 years, 12 years, 15, years and 20 years.
4. Multiple Investment Options
Saving plans like Invest 4G ULIPs provide investment flexibility as well. You have the option to invest in the funds as per your risk appetite and investment horizon. Invest 4G plan offers eight different funds including equity, debt, hybrid and liquid funds for you to grow your money.
You have the option to invest your money in any one or more funds in the ULIP. Also, you can switch between funds within the plan without incurring any charges or taxes.
5. Premium Protection
This is one of the most important features of a savings plan. You invest in savings plans to achieve long-term goals like your child’s higher education or marriage. What will happen to it if you die in the middle of the policy tenure.
This is where premium protection steps in. If you choose this option, then your premium will continue to be paid by the insurance company in case of your untimely demise. It is done so that the policy remains intact and the intended purpose of the plan is served.
For example, you have taken a 15-year policy of which you have to pay a premium for 10 years. Now you, unfortunately, died during the 5th year of the policy. If you have chosen the premium protection option, your premiums and life cover will be covered by the company.
6. Tax Benefits
A savings plan essentially being a life insurance plan brings with itself certain tax benefits.
You can avail of tax benefits under section 80C of the Income Tax Act 1961. The maximum amount that can be availed is Rs 1.5 lakh. That is your investment amount can be deducted from your taxable income.
Tax benefits can be availed even at the time of receiving death or maturity benefit under section 10(10)D as well.
Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Savings Plan offers you all the tax benefits mentioned above.
7. Option to Add Riders
Saving plans, like Guaranteed Savings Plan, allows you to add riders to your existing plans. Riders are the additional benefits that get attached to the basic plan. You take riders to get additional features in a policy. Many types of savings plans involve riders.
Riders are of many types, each adding specific value, though increasing the premium as well.
For example, Accidental Death rider, if chosen provides you with an extra amount over the death benefit if your death is due to an accident. Others include Critical illness rider, premium waiver, etc
8. Option of Borrowing Against Policy
Plans like Guaranteed Savings Plan give you an option to take loans against the policy. This feature comes in handy when you require some cash and your policy is running. This option is available after your policy has completed at least two consecutive years.
This helps you take a loan when the policy reaches a surrender value. This can help you meet any contingent need.
The loan interest prevailing changes every year.
These were the features that define a savings plan. All these features must be present to make a savings plan perfect. So before looking to buy, make sure that the savings plan offers value to you.
Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Savings Plan offers all the above features. Apart from these it also offers facilities such as a Higher Premium booster which gives you extra benefit for making higher premium payment. It also offers a wealth booster as well.