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All You Need To Know About Guaranteed Savings Plan

dateKnowledge Centre Team dateJanuary 12, 2021 views234 Views
All You Need To Know About Guaranteed Savings Plan

When it comes to life, one can never plan enough for all its ups and downs. We often aim to achieve various milestones in our lives. However, such aspirations may require a large amount of money. This may include everything - from marriage to a child's education. If you like to plan and have enough monetary resources in hand for supporting your future needs, you must know about the Guaranteed Savings Plan offered by Canara HSBC Oriental Bank of Commerce Life Insurance.

Planning for the financial needs that may lie ahead helps you stay resilient. Each of us wish that our family should never face any financial hardships in our absence. Through regular savings, you can ensure that you have a safety cushion even when you cannot procure enough funds.

People usually believe that term insurance plans are the to-go options as it helps them save money along with various other benefits. With the flexibility provided by a guaranteed savings plan, you can save money while being assured that you will get returns, no matter what. There is no clause in the savings plan such that if the policyholder outlives the plan, they will not get any benefits. This makes it a much safer and feasible option as compared to other term insurance plans.

What are Guaranteed Savings Plans?

Guaranteed Savings plans are usually non-participating plans that have an endowment assurance at a fixed amount. You will need to pay the premiums for a fixed period. Once the plan matures, you will receive the benefits. With a savings plan, you get an assured sum of all your premiums paid at the end of the plan's term with other additions.

These additions include a fixed rate of interest added each year during the savings plan term. Along with interest, which is fixed at the commencement of the plan, the bank also offers a maturity bonus, which is a fixed amount of lump-sum money added to the final amount at the end of the term.

The savings plan is also covered under the tax benefits criteria, as explained in the Income Tax Act, 1961. Those who opt to set up a savings plan can avail of the tax benefits as per current income tax laws prevailing in the country.

When getting the savings plan, you will need to set a time duration after which the plan will be considered mature. It may vary from 7 to 18 years, as per the preference of the policyholder.

After the plan's maturity, the policyholder or the beneficiary will receive the final amount that will be the sum of all the premiums paid and the rate of interest calculated.

Each bank or service provider has its own set of rules for a savings plan. The minimum age ranges from 0 (zero) to 60, while the maximum age ranges from 18 to 75.

In case of a sudden death, the nominee can get the returns calculated as per the number of premiums paid by the policyholder.

Benefits of Guaranteed Savings Plan

Various benefits are assured with the guaranteed savings plan. These may vary slightly from one insurance provider to another. You can customize and choose the plan that provides the benefits, which address your current and future financial needs. The key features and advantages of a savings plan have been listed below.

  • Premiums

    You can choose to pay premiums over some time or at a single shot. These options are provided to ease the burden on the policyholder. Suppose, you do not want to face the hassle of remembering to pay the premiums at regular intervals. In that case, you can decide to pay the complete sum in a single payment.

  • Policy Term

    Choose the term that suits your needs. If you think that you will need your savings soon, you can select the seven-year term savings plan. For long term savings, you can extend your policy to 10 or more years.

  • Guaranteed Maturity Benefits

    Under the guaranteed savings plan, you are assured of getting benefits upon the maturity of the plan. The advantages will be the same as the assured sum that was decided before the planned commencement. The maturity benefit is applicable and payable upon the policyholder's survival past the end of the term.

  • Death Benefit

    Many banks and service providers also ensure a death benefit clause under their savings plan. The benefit is provided to the beneficiary if the policyholder has a sudden demise. Moreover, the policy should be ongoing or not matured. In such cases, the nominee of the plan receives a sum assured upon death. The sum has a much higher interest rate compared to a traditional life insurance policy.

  • Trial Period

    If a person is not satisfied with any clause or terms and conditions of the savings plan, they can cancel the policy and return the documents within 15 to 30 days of its commencement. If the policyholder returns the documents within the applicable cancellation period, the bank will return its premium without any deductions.

  • Loans

    Under the savings plan, you can also opt to get a loan. Once the policy acquires a surrender value, you may avail the loan facility. The amount of loan available with the savings plan varies from bank to bank and policy sum. In a Guaranteed Savings Plan, the minimum loan value that can be availed is Rs. 20,000 and the maximum is 80% of the prevailing surrender value.

  • Grace Period

    Various banks also provide a grace period of 30 days. The grace period means that the plan's premium can be paid under 30 days for annual, half yearly and quarterly modes policies. During this period, no fine or deductions are made by the bank.

Other Features of a Guaranteed Savings Plan

Along with the benefits listed above, there are other essential features of a savings plan that may make it a perfect option for you to start saving up for future financial needs. These are provided to ensure that the policyholder is not bound under the rules.

  • Missed Premiums

    Suppose you discontinue paying premiums after at least 3 years of policy years. In that case, the plan will be considered as paid. The interest rate and the final sum will be calculated as per the paid premiums before their discontinuation.

  • Discontinuation of Policy

    If you need to discontinue the plan, you will get as much as the saving plan's surrender value. The clause will only be applicable if the policy has crossed the 3 years mark.

  • Revival

    If you want to revive a savings plan that you discontinued not more than 3 years ago, then the bank or the insurance provider will accept your request. The terms and conditions of the revived policy may vary from the initial one.

Documents Required for Guaranteed Savings Plan

You have now understood how a guaranteed savings plan works. If you are considering one, you will need to submit the following documents to the bank or insurer. Additional documents may be required or asked for, depending upon the regulations.

  • Application form or Proposal form
  • Medical documents that has a detail of your medical history
  • Address proof
  • Identity proof
  • Occupation and salary proof
  • Other KYC documents

What to Consider When Comparing Various Banks and Insurance Providers for Guaranteed Savings Plan?

Various factors can make saving plans different from the other. While you are doing your research, you should consider these facts to ensure that you select what meets your financial requirement.

  • Minimum age criteria
  • Maximum age criteria
  • Polity term
  • Premium paying term
  • Yearly premium
  • Sum assured
  • Additional benefits along with sum assured such as maturity benefit and guaranteed addition

For anyone who has just joined the taskforce and received their first salary, a savings plan may not sound like a necessity. However, whether you are just an intern or have been part of a company for years now, savings are something that you should not overlook.

These can act as life saviors during the difficult times of life. Consider various savings plans available and choose one that will help you and your family address any financial shock that may come up in the future. You can take the help of a consultant or refer to various comparison websites to select the best one for you.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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