A savings insurance plan is one of India’s most popular savings plans for people looking for options to secure a guaranteed return. This life insurance-based savings plan helps people plan their future financial goals and invest in them accordingly. However, are the maturity benefits actually guaranteed?
Let us get into the details to find out. But, before getting started, let us understand what the savings insurance plan means.
What is a Savings Insurance Plan?
The savings insurance plan is a life insurance plan that provides dual benefits, life insurance to protect the family’s financial future in the absence of the policyholder and a guaranteed return as the maturity benefit. Therefore, it differs from the other savings schemes in India, considering the dual benefits.
In addition, insurers provide flexible features to customise and enhance the product to the desired extent. For example, Tata AIA insurance provides online access to purchasing various savings solutions and deciding between premium payment options, such as regular and limited premium payment options.
How Does The Savings Insurance Plan Work?
The working of the guaranteed savings plan helps understand the guaranteed returns better.
The premium paid by the policyholder will be considered for providing the dual benefits. The insurer utilises one portion to provide the life cover, and the other portion is saved regularly on behalf of the policyholders to provide guaranteed returns.
While funds are guaranteed at maturity, they cannot be stated as 100% guaranteed. There can be minor revisions on the final amount considering the charges, the insurer’s policy terms and conditions, etc.
However, compared to the investment in the financial market, the funds in the guaranteed return insurance plan are highly secured, and the risks are extremely low. Therefore, the policyholders can save a huge fund and help maximise returns for the long term.
Factors To Consider
Here are a few factors the policyholders need to consider about the guaranteed return maturity benefit from the savings insurance plan.
- Planned guaranteed investment – The guaranteed maturity benefit is decided during policy inception. Therefore, the policyholders can calculate the funds required at maturity based on the financial goals to plan the investment.
For example, suppose the policyholder desires to purchase a new house after 10 years and wants to accumulate funds to pay for the down payment. In that case, he can calculate the approximate value based on the current value, consider the inflation rate, and invest in the savings insurance plan accordingly.
To simplify, the policyholder can use the online savings calculator to determine the funds and the corresponding premium cost of the savings insurance policy.
- Flexible guaranteed benefits – As the returns are secure in the guaranteed return plan, policyholders can use flexible features such as payout options to maximise the benefits.
For example, suppose the savings insurance plan is purchased for retirement needs. In that case, the policyholder can choose the regular income option as against the lump sum or the combination of regular income and a lump sum to receive the guaranteed maturity benefits as a regular income for a defined income period to ascertain the guaranteed returns to provide the regular income after the policy tenure or retirement.
- Bonus additions – Some insurers offer savings plans, also called participating plans. These plans provide options to boost the accumulated corpus by adding bonuses. The insurance provider offers bonuses based on their operations and declared gains.
The policyholders can receive the bonus yearly as and when declared or accumulate and receive it as a maturity benefit with guaranteed returns.
Therefore, the maturity benefit on the guaranteed savings insurance plan, although not 100% guaranteed, can be used in multiple ways to maximise the benefits as the returns are secure and ensure extremely low risk on the investment made.
The guaranteed savings plan provides dual benefits, life cover for the policy tenure and guaranteed returns at maturity. Although the maturity returns are not 100% guaranteed, they are highly secured as the returns are not market-linked. Therefore, as the risk is extremely low, the policyholders can use a calculative investment strategy, flexible features and bonus additions to boost the maturity returns.