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Top 5 Mistakes to Avoid while Buying a Savings Plan Online

dateKnowledge Centre Team dateMay 03, 2021 views117 Views
Top 5 Mistakes to Avoid while Buying a Savings Plan Online

Saving small amounts right from the day you start earning will help you reach your financial goals, fund your children’s education, maintain a good lifestyle, provide for contingencies, and plan for retirement as well. One can save by investing in a wide range of asset classes and financial instruments. A diverse portfolio is less risky and has a higher probability of better returns in the long run. Savings is not necessarily about keeping money in the bank account. The best investment plans in India recommend investing in life insurance policies that can give you a life cover, offer guaranteed returns, and/or support post-retirement.

With a plethora of information available online, it is easy to get misled into buying something that may do more harm than good in the medium-long run. People prefer transacting online because of convenience. In large cities, travelling to branches is tiring and time-consuming. Unpredictable work schedules make it difficult to meet insurance advisors at home, whereas meeting them at the office may not help because of tight schedules. After all, one has to spend quality time understanding the options and taking a prudential decision.

With the advent of hassle-free online payments using credit/debit cards, UPI, etc, paying for a policy is quick and simple. COVID-19 has hastened this trend further because this is the most effective contactless buying method. At the same time, people tend to make some common mistakes, out of oversight, while buying a savings plan online.

#1 Providing Incorrect Information

Life insurance is a contract based on trust, and while the life insurer has to disclose everything to the public, you are responsible for disclosure in the application form. When you buy a life insurance policy, anything that can affect your health or life needs to be declared to the insurer.

The application form generally asks about the following:

  • Lifestyle habits like smoking, alcohol use etc.
  • Health condition, recent medical recoveries
  • Family history with health-related issues
  • Occupation
  • Hobbies

Information related to health conditions such as hypertension, diabetes should be disclosed. Any pre-existing/past illnesses should also be mentioned. Questions on social habits such as liquor consumption, smoking should be responded to. Withholding (even unintentionally) information may look like suppression of facts. This may impact the settlement in case the need arises.

Know if you can buy a life insurance without a medical exam in INDIA.

#2 Opting for Excessive or No Riders

Riders make the plans more effective and provide enhanced protection. For example, accident and disability riders give away a fixed amount irrespective of actual expenses incurred. The objective is to help the insured person to meet incidental expenses that may not be covered by the health insurance plan.

Waiver of premium riders, as the name suggests, takes care of the future premiums, in case the person loses income due to permanent disability or a critical illness. However, selecting too many riders will make your policy more expensive.

At the same time, ignoring riders may not be a prudent decision as mishaps do not come with a warning.

#3 Not Understanding the Policy Term

If you buy a small tenured policy when you are young, the policy may terminate even before you reach your 50’s. Although the best saving policy may still be available, you may end up paying more for life protection. Thus, eroding the amount available for investment.

The policy tenure could vary based on the type of policy:

Policy type Policy Tenure
Term Life Insurance Maximum coverage period or the number of years your cover will be active from the date of commencement (not purchase, check the policy document for this date)
Whole Life Insurance The policy will continue up to 99 or 100 years of age
Lifetime Deferred Annuity Plans Up to 100 years of your age, or if held jointly, the age of your spouse
Other Annuity plans The annuity will continue till this period only
Child Plans The number of years the plan will continue to cover your life and grow the corpus

#4 Choosing Insufficient Sum Assured

This is one of the most common mistakes. Opting for either a very large or a very small insurance cover can defeat the purchase of the policy or make it unsustainable. When deciding the Sum Assured, be realistic on what you can pay each year.

You must also factor in the amount your family may need in case you are not around. The Sum Assured should be decided basis these two parameters.

Here again, the choice of the type of life insurance plan will make a difference:

  • Term Insurance Plan: Get a life cover of 10 to 15 times your annual income
  • Savings Plans: Add a life cover that is at least 10 times the amount you will invest every year
  • Pension Plans: Life cover is decided based on your total investment. So, you may not have to worry about the size. However, avoid going for a very large cover amount.


#5 Selecting a Long-Term & Inflexible Plan

Look at plans that allow partial withdrawals, milestone-based pay outs, etc. Contingency expenses are unpredictable. Say, you have to urgently buy a computer or replace your faulty appliances. Top insurance plans permit partial withdrawals to manage such unexpected expenses.

Canara HSBC Oriental Bank of Commerce Life Insurance offers Money Back Advantage Plan to suit individual lifestyles and aspirations at various life stages. If you plan to go abroad for a mid-career refresher program or aspire to renovate your home every few years, flexibility in investment plans will help you meet your financial goals without compromising on your lifestyle.

Loan on policy and collateral for the loan are two more features to look out for. These flexibilities allow you to operate your insurance policy just like a savings bank account, albeit, with many more benefits!

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Frequently Asked Questions

How Savings Plans by Canara 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.

Who should invest in a Savings Plan?

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. Savings plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

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 capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

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.

Read More
Saving plan 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.

Saving plan for future

The Smart Goals 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.

Saving plan 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.

Where should I invest my money?

You should spread your investments across financial instruments. However, having a suitable savings plan in your portfolio is extremely important. It ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

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.

Tax Saving Investment for retired mother

Savings plans are tax-efficient investment instruments. Samridh Bhavishya traditional savings scheme designed to ensure regular income after retirement is the best savings plan for retired mothers.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. Saving plans offer 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.

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 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 appreciation in capital is significant. Even a small amount invested for a long time can give substantial returns due to compounding.

Read More
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. Choose 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.

Read More
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.

Read More
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