Basics of Guaranteed Savings Plan
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Basics of Guaranteed Savings Plan

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  • 27th Apr 2022
  • 2,645

 Basics of Guaranteed Savings Plan

Life is full of uncertainties, and thus planning things for achieving any goal or in case of an unfortunate event is a wise choice. Even when we aim for something bigger, we plan on how we can achieve it. Money is a basic requirement to support fulfilling all such needs and desires. From family gatherings, marriage functions, to buying a car or your child’s education, everything needs financial planning.

So, if you are among those who like to have things planned and have enough monetary resources to tackle any emergency, then Guaranteed Savings Plans are the investment tool that you must know about.

This article will discuss guaranteed return plans, the features and benefits of a guaranteed savings plan, and highlight its important aspects.

Basics of Guaranteed Savings Plan

What are Guaranteed Savings Plans?

The guaranteed savings plans, also known as guaranteed return plans, usually are non-participating insurance plans that offer an endowment assurance at a fixed sum. In this insurance plan, you will have to pay premiums for a fixed period, and once the plan matures, you will receive an assured benefit. If you opt for a savings plan, you will get the sum of all your premiums assured with other additional benefits.

The additional payment benefits include interest amounts at a fixed rate added per annum. This interest rate is fixed at the commencement of the plan. In addition, you are also entitled to a maturity bonus offered by the bank. The lump-sum amount is added to the final balance at the end of the policy term.

People generally take term insurance plans as the primary option to help them save money. However, guaranteed savings plans help you save money and get guaranteed returns. Furthermore, no policy guideline or clause mentions that if the policyholder outlives the plan’s term or duration, they might not get some benefits, making it one of the most reliable, feasible, and trustworthy options among all the other insurance plans available in the market.

Benefits of guaranteed savings plan

  • Choice of premium payment (pay at once or in small instalments)
  • Choice of investment duration
  • Guaranteed maturity benefits
  • Dedicated allocation in case of policyholder’s untimely demise while the policy is not mature
  • Trial period for testing the policy terms and guidelines
  • Tax benefits

Features of Guaranteed Savings Plans

It is always important to understand the features of any investment avenue that you are considering as a savings option. A few important features of guaranteed savings plan:

  • Discontinuation Policy

Suppose you have opted for the savings plan and want to discontinue, then you are entitled to receive an amount equal to the surrender value of the savings plan. However, this clause is only applicable if your policy duration has crossed the 3-year mark.

  • Missed Premiums

Many insurance plans charge you if you miss a premium. For example, in the case of guaranteed savings plans, if you cannot pay the premiums after 3-years of the policy duration, your plan is considered to be paid in full. So, if you have regularly paid the premiums for up to 3-years of the policy duration and then discontinue paying the premiums, your plan will be considered as paid in full. However, the interest rate and the final amount will be calculated based on the paid premiums before the discontinuation of the premium payment.

  • Policy Revival

Suppose you discontinued the premium payment for certain reasons and now want to revive the plan. In such cases, guaranteed savings plan allow you to revive your policy if it has not been discontinued for more than three years. Kindly note that the terms and conditions of the revival may vary depending on the insurer.

This unique financial instrument comes with numerous lucrative features and offers many benefits, making it one of the beneficial plans for policy buyers. So, understand the nitty-gritty and invest your hard-earned money to create wealth in the most reliable and hassle-free manner using a Guaranteed Savings Plan.

- A Consumer Education Initiative series by Kotak Life

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