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What Are Guaranteed Saving Plans, And How Does It Work?

dateKnowledge Centre Team dateDecember 06, 2020 views157 Views
What Are Guaranteed Saving Plans, And How Does It Work?

Guaranteed Savings Plan is a Life Insurance Plan that defends the customer from prospects. It provides confidence to persons financial dependents helps in establishing retirement policy, Best Saving Plan, etc.

How Guaranteed saving Plan Works

There are two smooth steps that a person desire to adopt to an excellent guaranteed saving plan:

  • Select the guaranteed saving plan- for seven years, eight years, or ten years
  • Choose the value or sum assured

When the policy matures, a person will gain:

  • Sum Assured: Sum of all the premiums in the policy
  • Regular Addition: The amount indicated at the start of every policy
  • Maturity Addition: The lump sum value of the premium
  • If the person dies during the intense term of the policy, formerly their policy nominee will draw a Guaranteed Death Benefit, which is every time larger than all the premium amount

Benefits of Guaranteed Saving Plans

  • Benefit on the maturity amount is maintained through Guaranteed Sum Assured
  • Bank provides complete security on the amount with Premium Protection choice
  • Upgraded Protection with Double Protection choice is handed out to the customers with Double Sum Assured on unforeseen circumstances
  • Credit Facility to meet impromptu monetary necessities
  • Tax benefits are provided to customers under Section 80C and Section 10 (10D), of Income Tax Act, 1961

Guaranteed Saving Plan Options

There are three types of policies available:

  • Guaranteed saving option
  • Guaranteed Saving with double protection option
  • Guaranteed saving with premium protection option

Terms and conditions for Guaranteed Saving Plan

Age

Guaranteed saving option:

Minimum Maximum
Entry Age 0 Years 60 Years
Maturity Age 18 Years 75 Years

Guaranteed Saving with Double Protection Option:

Minimum Maximum
Entry Age 18 Years 60 Years
Maturity Age 28 Years 75 Years

Guaranteed Saving with Premium Protection Option

Minimum Maximum
Entry Age 18 Years 55 Years
Maturity Age 28 Years 75 Years

Premium Conditions

Mode Minimum Instalment Premium Maximum Premium
Annual 20,000 There is no limit for Maximum Premium
Half-Yearly 10,200
Quarterly 5,200
Monthly 1,800

Policy Term and Premium Term

Policy Term 10 Years
12 Years
15 Years
20 Years
Premium Term 5 Years
7 Years
10 Years

Sum Assured on Maturity of Guaranteed Saving Plans

Sum assured on the maturity of guaranteed saving plans depends upon five factors:

  • Plan Option
  • Annualised Premium
  • Entry Age
  • Policy Term
  • Premium Payment Term

Minimum Assured Sum is Rs. 76,500

Maximum Assured Sum dependents upon the amount deposited at the time of taking the guaranteed saving plan

Sum Assured for Premium

Annualised Premium Assured Premium
20,000 to less than 30,000 NIL
30,000 to less than 40,000 4.0%
40,000 to less than 50,000 7.0%
50,000 to less than 75,000 8.0%
75,000 to less than 1,00,000 10.0%
Greater than or equal to 1,00,000 11.0%

Sum Assured Death Benefits

  • 11% on annualised premium
  • 105% of all the premiums are paid at the time of death
  • The guaranteed sum assured on maturity
  • Formula to calculate sum assured death benefits
  • Accidental Death Benefit Sum Assured = Sum Assured on Death

Guaranteed Payable through Premium Term

5 Years 8%
7 Years 10%
10 Years 12%

Triple Benefits Offered by Bank

  • Guaranteed Sum Assured on Maturity
  • Assured Guaranteed on Yearly Option
  • Guaranteed Loyalty Additions on Maturity

Note: After the payment of the benefit, the policy plan will automatically get cancelled, and the bank is not liable to provide any further benefits to its customers.

Benefits on Tax

  • Premiums Paid- Eligible for tax benefits u/s 80C of Income Tax Act
  • Maturity and Death Benefits- Eligible for tax benefits u/s 10 10(D) of Income Tax Act

Note: The customer’s receive tax benefits under Section 80C and Section 10(D) of the 1961 Income Tax Act

Conditions on Policy

Loan

  • The loan is given only when the policy plan get the surrender value of the amount
  • The minimum loan amount is Rs. 20,000
  • The maximum loan amount is 80% of the surrender value
  • The minimum repayment amount is lower than Rs. 2,000
  • The maximum repayment amount is equal to the outstanding loan amount

Discounts on the Premium Amount

Conditions Descriptions
Discount on the premium paid before the first two years of the policy No discount benefit is paid upon death or termination of the policy
Discount on the premium paid after the first two years of the policy Paid-up amount is provided to the person

Surrender amount is paid as soon as the customer requests the surrender amount

Paid-up Value

  • Paid-up value is given to the customers when they paid the premium amount for at least two years
  • Paid-up amount is given at the of death or maturity of the policy, or whatever comes first
  • Bank will stop providing the Guaranteed Yearly Additions once the premium amount is paid to the customer
Paid-up Sum Assured on Death No. of Premiums Paid

Total no. of Premiums Payable during Term Policy × Sum Assured on Death

Paid-up Sum Assured on Maturity No. of Premiums Paid

Total no. of Premiums Payable during Term Policy × Guaranteed Sum Assured on Maturity

Paid-up ADB Sum Assured No. of Premiums Paid

Total no. of Premiums Payable during Term Policy × ADB Sum Assured

Paid-up Guaranteed Loyalty Addition No. of Premiums Paid

Total no. of Premiums Payable during Term Policy × Guaranteed Loyalty Addition

Maturity Benefit

  • Paid-up Sum Assured on Maturity
  • Accrued Guaranteed Yearly Addition, if any available
  • Paid-up Guaranteed Loyalty Condition

Note: Once these benefits are paid the bank the guaranteed saving plan policy will automatically terminate

Death Benefit

  • Paid-up Sum Assured on Death
  • Accrued Guaranteed Yearly Addition, if any available
  • ADB Sum is given if death is due to the accident

Note: Once these benefits are paid the bank the guaranteed saving plan policy will automatically terminate

Surrender

Guaranteed Surrender Value (GSV) Special Surrender Value (SSV):

Surrender value is given only when the premium is paid by the customer of at least two years

Guaranteed Surrender Value (GSV) Special Surrender Value (SSV)
Total premiums are paid excluding UW premium if any + Assured guaranteed additions It is determined by the company

It may be revised in future by consultation of the authority

Exclusions

1. Suicide

  • The bank is liable to pay 80% of the total premium amount in case of suicide
  • Within the 12 months of the revival of the policy, the nominee of the guarantee saving plan will get the premium amount

2. Accidental Death

The customer is advised to consult the respective bank executive or check the bank brochure or website to know more about Invest 4G, and other Best Saving Plan for the accident death amount.

Steps involved in buying the Guaranteed Saving Plans

1. Customer should choose the plan as per their need:

  • Guaranteed saving option
  • Guaranteed Saving with Double Protection Option
  • Guaranteed Saving with Premium Protection Option

2. Customer should select the combination of Policy Term and Premium Payment Term as per their finances

3. Choose the Policy Term available as the format of 5/7/10 years or 10/12/15/20 format

4. Customers should choose Premium amount according to:

  • Minimum premium Rs 20,000
  • Based on Yearly, Half Yearly, Quarterly, Monthly basis

Benefits of Guaranteed Saving Plans are described with the help of Illustrations

Sample Illustration 1:

The illustration mentioned above depicts how a customer named Suresh buys the Guaranteed Saving plan for twenty years and is willing to pay the premium amount for the next ten years. As he has taken the guaranteed Saving Plan for twenty years and pays a premium for only ten years, so for the rest ten years, he will enjoy the benefit of the amount he gained from the Guaranteed Saving Plan.

Sample Illustration 1 on Maturity Benefit:

The above-mentioned illustration image describes the maturity benefit that the customer is going to get after purchasing the Guaranteed Saving Plans of their choice and preference.

Sample Illustration 1 on Death Benefit:

The above-mentioned illustration is the amount the person is going to get if any unforeseen incident has occurred.

Sample Illustration 2:

Sample Illustration

The above-mentioned illustration image describes how Mr Gupta chose the policy term for fifteen years with the premium payment of Rs. 3,00,000 for ten years to secure his son’s future. Mr Gupta has taken this decision because if he pays the premium amount for ten years, he is going to get the doubled income benefit for the next ten years.

Sample Illustration 2 on Maturity Benefit:



The above-mentioned illustration image gives an idea to the person what kind of benefits they will get on maturity of the Guaranteed Saving Policy.



The above-mentioned illustration image describes the amount that the bank will pay for any unknown incidents or circumstances.

Guaranteed Saving Plans helps in shaping the future of the person, it gives financial independence. It is widely chosen by people to make them and family financially secure. It provides the best saving plan like retirement plan, children education plan, etc. There are three kinds of plan available: Guaranteed saving option, Guaranteed Saving with double protection option, Guaranteed saving with premium protection option), a person can choose the best for them.

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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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