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How to Calculate returns on an assured savings plan?

Assured Savings Plan - This plan provides guaranteed returns, bonus, and enhanced protection with insurance riders. Know how to calculate returns on an assured savings plan.

  • 9,457 Views | Updated on: May 24, 2024

The financial future of your family can be assured with the help of life insurance. Your family will receive the death benefit in the event of your passing, which they can use to cover their expenditures. The calculation of the sum assured and the premium in every policy stays the same, even though there are currently numerous types of life insurance plans to suit every need.

What kind of sum assured do you require? How will the premium for your chosen sum insured be determined? Take a peek at it.

What does an assured savings plan mean?

The assured savings plan offers life insurance protection with guaranteed savings. This plan provides loyalty additions and lump sum rewards at maturity to help you provide for your family financially in the event of an unlucky circumstance. Loyalty Enhancements to the maturity corpus sum assured is the guaranteed sum that, in the event of your passing, your policy’s beneficiary will receive. The coverage or the cover of your insurance policy are other names for the money assured.

What is the premium for an assured savings plan?

An assured savings plan’s premium is a one-time or ongoing cost that you incur to purchase the coverage. Your policy will only remain in effect if you pay the premiums by the insurance company’s rules.

How is the sum assured in the assurance savings plan calculated?

Calculate returns on an assured savings plan

The sum assured for your assurance savings plan can be determined in several ways. Human Life Value, often known as HLV, is one of the most used techniques. According to your existing and projected costs, current and projected income, and age, this approach determines your sum insured.

It assists you in figuring out your capitalized value using the current inflation rate and determining your HLV, and choosing the appropriate sum assured.
In a Term Insurance policy, the Minimum Sum Assured is calculated as follows:

Calculate returns on an assured savings plan

Minimum Sum Assured = Annual Income x 10 times + Loans/Liabilities.

It is advised to go for 15 to 20 times your annual salary if you can afford the premiums, which are rather affordable for the sort of coverage you receive.
Your life insurance premiums are influenced by several key variables, including the following:

Determinants of premium

  • Planning style
  • Assured sum
  • Your age
  • tenure of policy
  • Riders (if selected) (if selected)
  • state of health at the moment
  • Smoker/non-smoker

What should you think about when choosing sum assured?

Total One-Time Costs

The family’s one-time expenses must be considered before using the investment returns calculator. These costs include credit card payments that can be made in one lump sum, mortgages, personal loans, home loans, student loans, and outstanding obligations.

Over And Above All, The Assets

Using the investment returns calculator to evaluate the overall value of your assets is the next step. Remember that your family is willing to offset your additional assets with a lump sum liabilities amount. Stocks, mutual funds, fixed deposits, provident funds, and automobiles are among the examples. Properties such as a home, a piece of land, gold or silver bars, expensive jewellery, etc., should also be considered.

Take Liabilities Out of the Assets

You can determine the net assets available for your family to meet any financial challenges, such as paying for funeral costs, accumulated rent obligations, etc., by subtracting liabilities from assets.

Assets are subtracted from liabilities

If the liabilities exceed the available assets, you must use the difference as the minimal level of insurance to ensure that your family won’t be left with any debt when you pass away.

Determine Annual Family Expenditures

This is highly significant. It’s crucial to factor in your family’s annual expenses when determining your sum savings assured plan in order to guarantee that all of their financial demands will be satisfied when you pass away. This covers the cost of groceries, electricity, tuition, and other monthly utility payments. Multiply all of these costs by 12 to get the net annual cost.

Determine how many years you need to offer protection

You should consider how long you want to protect your family when choosing the sum assured plan for a life insurance policy. To get an approximation of the total insured, multiply your family’s annual expenses by that amount, then add it to the net liabilities.

You can increase the sum of the savings assured plan if you believe that the predetermined amount won’t be enough. However, you must be prepared to pay greater premium amounts for that.

Choosing the correct sum assured

It is solely your obligation to ensure that your family maintains its financial stability even after you pass away if you have dependents in your family or are the primary provider in your home. And for this reason, it’s crucial to get a life insurance savings assured plan with the appropriate amount of coverage. When choosing the sum assured amount, be careful to take into account all the variables, including annual family spending, inflation, premium rates, etc.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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