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What are the Key Eligibility Conditions of a Savings Plan?

dateKnowledge Centre Team dateJanuary 18, 2021 views174 Views
What are the Key Eligibility Conditions of a Savings Plan?

It is always well-advised to buy a guaranteed savings plan for yourself to take care of your family's future in the case of your untimely demise. Even after your death, there will be exorbitant expenses that your family might have to shoulder, like a child's education or marriage, or taking care of your spouse's retirement and making sure nothing goes awry for your family in the future.

The savings plan that you choose should cover your specific needs and have the criteria that you will meet to ensure maximum returns. It should suit your particular economic background so that you will regularly reach your objective without missing any premium payments.

It would be best if you also considered economic factors like inflation and a rise in costs for education, marriage, and similar enormous additional costs. Ideally, there should be an incremental interest that will ensure that your family will get covered securely.

An ideal savings plan should also provide a compensation/death benefit that can take care of your family if you die an untimely death. There should be additional drivers if your death were accidental or due to the sudden onset of a dangerous disease.

Canara HSBC Oriental Bank of Commerce Life Insurance offers a guaranteed savings plan giving you a guaranteed maturity benefit, lifelong coverage and enhanced protection that will be more than enough to meet your family's needs after you have passed away.

Are you Eligible for the Guaranteed Savings Plan?

There are certain critical eligibility conditions according to which you will be given a customized savings plan to pay premiums.

The company also considers all the risk factors including habits– such as smoking, drinking, history of drug addiction, pre-existing chronic health conditions like diabetes or high blood pressure, genetic conditions that may reduce the length of your life.

Entry Age

Your entry age is the minimum age at which any person will be allowed to open and work with an independent savings bank account. Individual banks will keep it given their risk management systems, which is why there is usually a fixed limit in terms of age. Ideally, a person above 18 years of age would be a perfect candidate for a savings account, primarily because a child below eighteen cannot legally sign documents or provide consent. But there is always the option to start an account in your name and later give the child ownership.

Plan Options Minimum Entry Age Maximum Entry Age
Guaranteed Savings Option 0 years 60 years
Guaranteed Savings with Double Protection Option 18 years 60 years
Guaranteed Savings with Premium Protection Option 18 years 55 years

As seen above, there are different plan options for which the upper and lower entry age limits vary.

For the first guaranteed savings option, the minimum entry age is 0 years. This means that you can take an account for your child as soon as they are born and begin saving up right from that moment. This will ensure that they will get a more considerable sum of money by growing up. The maximum limit for this plan is sixty years, beyond which it is unlikely that the person will survive for that long.

The guaranteed savings plan with double protection option is available only to 18 years of age or above. This means that they will have to consent to and open the bank account. The upper limit to this savings plan is 60 years of age.

The guaranteed savings plan with a premium protection option also mandates a minimum age of eighteen, but the upper limit is 55.

The age calculated is taken to be how old you or your nominee is as of the last birthday.

Maturity Age

The maturity age is the age at which the plan matures, and the nominee is eligible for the amount of money. The maturity date is when the total life insurance policy money is payable to the nominee by the insurance company. This can be either death or contract stipulation. It also implies that the cash value and death benefit amount are now equal. You will no longer have to pay any premiums, and most plans cover you for a few years after the maturity age as well.

Here is a tabulated list of the maturity age for Canara HSBC Oriental Bank of Commerce Life Insurance:

Plan Options Minimum Maturity Age Maximum Maturity Age
Guaranteed Savings Option 18 years 75 years
Guaranteed Savings with Double Protection Option 28 years
Guaranteed Savings with Premium Protection Option 28 years

As you can see from above, in the case of the first plan option – the guaranteed savings option, the minimum maturity is 18 years of age. Using this plan, you can start saving when the child is born until they are of 18 years of age, at which point the plan can mature and provide him or her with a specific amount of money.

The minimum duration of the remaining plans in a decade is why it is 28 years minimum age maturity for both the guaranteed savings with double protection option and premium protection open.

The maximum maturity age for all of the above plans is 75 years of age. This is usually the age at which most Indians retire or have already retired without a stable income. Since the average life expectancy of an Indian citizen is also around that age, this is an ideal upper limit for maturity.

Premium Paying Term

The total number of years you have to pay the premium determines your policy's length and coverage. This is different from the available policy term, which will make use of the available amount compounded from all your premiums to cover decades more from the date of your age of maturity. It is understood that the more extended coverage you have after your maturity age, the higher the amount of premium you will have to pay during the premium payment term, especially if the latter period is stretched over a shorter time.

Premium Payment Term (in years) Available Policy Term (in years)
5 10,15
7 12,15
10 15,20

If you choose to pay your premium payment for 5 years, you can have an available policy term for either a decade or an extended amount of 5 years more. If you choose 7 years as a premium payment term, you can benefit from 12 and 15 years. If you pay your premiums for 10 years, the available policy term can be extended to a minimum of 15 and a maximum of 20 years. The availability of this policy term will depend on the maturity age, in the sense that it should be within a lower limit of 18 and an upper limit of 75 where both limits are inclusive.

Premium Payment Mode and Modal Factors

The modal premium of any policy is the sum you will have to pay for each premium. The more considerable the amount for each modal premium, the fewer times you will have to make payments throughout the policy duration.

Regardless of this distribution of money throughout the policy, the long-term benefits remain the same. The way the money is spread throughout will depend entirely on your choices and how much you can afford to pay each time and how long you have to secure your family's future. This flexibility allows people from diverse economic backgrounds to secure saving plans.

The modal factor is used to convert annual premiums into smaller premiums that are paid with more frequency. For example, if the modal factor is 0.09, we can multiply it with the annual premium to figure out how much you will have to pay each month. The policyholder can always choose to change the premium payment mode subject to the modal factor application.

Mode Mode Factors
Annual 1.00
Half-yearly 0.51
quarterly 0.26
Monthly 0.09

Sum Assured

The minimum sum assured for the guaranteed savings plan is Rs. 76,500, which is usually sufficient for the average Indian household with reasonable expenses. The plus-side of a savings plan is there is no maximum sum assured – adding to the minimum assured sum and depending on how much money you can set aside for each premium and how frequently you can afford to invest in the savings plan.

There is, however, a minimum instalment premium – annually, you will have to pay a minimum of Rs. 20,000, calculated with the modal factor, can be distributed across the year as either a biannual sum of Rs. 10,200, a quarterly amount of Rs. 5,200 or a monthly sum of Rs. 1,800. There is no maximum premium limit, which means you can save as much as you want with this plan, the benefits you and your family can enjoy later in life!

Your eligibility for this guaranteed savings plan depends entirely on your health conditions, age, socioeconomic background etc. If you survive till the policy term is completed and all the premiums have been paid at that point, you will be eligible to receive a guaranteed sum, a yearly addition and a loyalty addition, after which there will be no further benefit.

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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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