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"Sum Assured" Meaning in a Guaranteed Savings Plan

dateKnowledge Centre Team dateDecember 06, 2020 views134 Views
Sum Assured Meaning in a Guaranteed Savings Plan

The value of saving up money for the future has been embedded in our culture for generations. It makes one of the most important lessons we learn as we move into work and family life to secure our future. Also in ahead for a secure retirement where the saved up money will be a huge aid. Investing in your future by saving money can not only ensure a future that is free of hassle and financial worries, but it can also provide us with lifelong comfort and security, especially in moments of emergency. In simpler words, investing is more like saving up for a rainy day. Early investment will give higher return rates. Guaranteed savings plans are a great way to invest in yourself and a secure future for yourself and your family.

What is a Guaranteed Savings Plan?

In simple words, a guaranteed savings plan is a life insurance policy that helps you save money and protect your cash reserve in times of emergencies for specific goals or milestones for the future, such as your children's higher education, their wedding or a new business. One of the main highlights of a guaranteed savings plan is that it guarantees payable benefits upon maturity of the plan, provided that you have paid all the premiums.

It is also a reliable way to ensure a secure future for your family if you (the beneficiary's) untimely death by any means. This is especially applicable to those working in hazardous jobs or conditions where the risk involved is very high. It is highly advised for such workers to consider guaranteed savings plan to ensure a safe, secure and prosperous future for their family.

What are the benefits of a Guaranteed Savings Plan?

As stated earlier, the guaranteed savings plan is a life insurance plan which will allow you to accumulate a cash reserve for the future. Additionally, there are some specific benefits to choosing a guaranteed savings plan insurance policy over others. Some of the main benefits of the guaranteed savings plan are:

  • It guarantees life cover for the entire plan period even though you only have to pay premiums for a limited period.
  • It guarantees protection of life insurance to the beneficiary by making a lump sum upon death. In this way, there will be enhanced protection for your family.
  • The payment terms are quite flexible. You will be able to choose one that is suitable for you and your family's needs, as well one that you can afford or manage according to your unique financial circumstances.
  • There are many different policy term options to choose from according to your needs, wants and circumstances.
  • You also get the option to opt for a High Premium Booster to get extra benefits for committing to the higher premiums.
  • And of course, you also get tax benefits under Section 80C and Section 10(10D) of the Income Tax Act.
  • The Sum assured that is paid upon maturity or an eventuality will be the highest amount of a range of options discussed below.

What is the Sum Assured in a Guaranteed Savings Plan?

The Sum assured is the total value of the insurance policy's insurance when purchasing it. Under any circumstances, such as a death, the Sum assured will be the amount that is paid by the insurance policy to the customer.

The Sum assured amount can vary from person to person. It usually depends on the yearly income of the customer. Generally speaking, the Sum assured is usually not more than ten times the customer's yearly income. It can also be between twelve and fifteen times the customer's yearly expenses, including the loans taken by them.

To be eligible for tax benefits, the Sum assured must be at least ten times the yearly premium.

What are the different options in a Guaranteed Savings Plan?

There are three main options to choose from in a guaranteed savings plan, each with its own set of benefits and specifications suited for different needs. You can select any one of these options:

  • Guaranteed Savings Option: This is a great option for those who want a life cover throughout the insurance policy term and want to receive the lump sum upon reaching maturity of the plan. The entry age starts from birth, and the maximum entry age is 60 years old as on the beneficiary's last birthday. The minimum maturity age is 18 years of age, and the maximum maturity age is 75 years old for this option.
  • Guaranteed Savings with Double Protection Option: This is a great option for those who want enhanced protection throughout the insurance policy term and want to receive the lump sum upon reaching maturity of the plan. For starters, the entry age is 18 years old, and the maximum entry age is 60 years old as on the beneficiary's last birthday. The minimum maturity age is 28 years of age, and the maximum maturity age is 75 years old for this option.
  • Guaranteed Savings with Premium Protection Option: Under this option, you can choose to enhance the protection for your family, and it is also a great choice for those who are looking to secure their children's future. For starters, the entry age is 18 years old, and the maximum entry age is 55 years old as on the beneficiary's last birthday. The minimum maturity age is 28 years of age, and the maximum maturity age is 75 years old for this option.

What are the different kinds of Sum Assured in a Guaranteed Savings Plan?

  • Sum assured on death: The value of the Sum assured on death will vary according to the plan that you choose within your guaranteed savings plan. However, it will be so chosen to be the highest of the following range of options as applied to your plan:

    1. An amount that is equivalent to eleven times the annualised premium.

    2. An amount that is equivalent to 105 per cent of the amount paid as of the customer's day or beneficiary's death.

    3. An amount that is equivalent to the guaranteed Sum assured on maturity, that is the Sum assured.

    4. The absolute amount that is to be paid upon death, which is also equivalent to the Sum Assured.

  • Accidental Death Benefit (ADB) Sum Assured: The Accidental Death Benefit (ADB) Sum Assured amount refers to the amount paid to the beneficiaries upon their death caused by accident. The amount that is the same as that of the Sum Assured on Death amount. This is especially beneficial for employees working in hazardous conditions or jobs.
  • Paid-up Sum Assured on Death: The Paid-up Sum Assured on Death is the amount paid after all the premiums have been paid and upon the death of the beneficiary. The amount is calculated as the Sum Assured on Death times the number of paid premiums, divided by the total number of payable premiums within the plan term.
  • Paid-up Sum Assured on Maturity: The Paid-up Sum Assured on Maturity is the amount paid at the maturity of the guaranteed savings plan after all the premiums have been paid. This amount is the Guaranteed Sum Assured on Maturity times the number of paid premiums, divided by the total number of payable premiums within the plan term.
  • Paid-up ADB Sum Assured: This amount is equal to the Accidental Death Benefit Sum Assured times the number of paid premiums and divided by the total number payable premiums within the insurance plan term.
  • Paid-up Guaranteed Loyalty Addition: This amount is equal to the Guaranteed Loyalty Addition amount multiplied by the number of paid premiums and divided by the total number of payable premiums within the insurance plan term.
  • Annualised Premium: This amount is defined as the payable premium in a year of your choice, which excludes rider premiums, the taxes, loadings for modal premiums (if any) and extra premiums underwriting extra premiums.
  • Total Premiums Paid: This amount is equal to the total sum of all premiums received, but it also excludes any rider premiums and tax amounts.

The minimum Sum assured amount is Rs. 76,500. There is no upper limit on the maximum Sum assured amount, and it is also subject to the company's underwriting policies. The minimum premium amount to be paid annually is Rs. 20,000. The minimum premium half-yearly is Rs. 10,200. The minimum premium amount quarterly is Rs. 5,200 and the minimum premium amount monthly is Rs. 1,800. Again, there is no upper limit on the maximum premium amount to be paid as it is also subject to the company's underwriting policies.

Mode Minimum Instalment Premium (₹) New regime
Annual 20,000 Maximum Premium: No limit (Subject to Board Approved Underwriting Policy of the Company)
Half-Yeraly 10,200
Quarterly 5,200
Monthly 1,800

As you have seen, there are many different sum assured iterations that you can choose from, and it varies from person to person depending on your annual income, annual expenses, number of premiums paid as well as their specific situation in life at the time of maturity of the guaranteed savings plan. However, it is clear that the Sum assured of your guaranteed savings plan is a smart choice to secure your future and that of your family. Take a step towards a better and worry-free future today.

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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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