Savings is one habit that grows over a period of time. When you start your career you have few responsibilities thus scope to save is more. But as responsibilities on the personal front increases the savings are more directed towards taking care of the family. It helps if you start saving early to create a good corpus. How about a plan which not only saves your money but also gives returns on it? The guaranteed savings plan is one such plan.
How these plans work?
Unlike the traditional endowment plans the guaranteed savings plan are limited premium plans. This means you and your family can enjoy long term saving without any financial worried.
The USP of the policy is that it is not a ULIP based policy. So your money is safe as it will not be invested in the market and will not be dependent on market movement. These are not one time payment plans. The plan requires you to invest regularly over a period of time. You can choose the period you want to invest regularly. A majority of the policies offer tenure of 15 or 20 years.
For a 15-year-term policy you pay the premium regularly for 7 years. Likewise for a 20-year term policy you pay premium for 10 years.
What you get on maturity is what makes this plan attractive. You get guaranteed benefit at the end of the policy term in form of Guaranteed Maturity Benefit (GMB). The GMB in the beginning includes the sum of all premiums. The amount increases every year with the addition of Regular Additions and in turn your savings also increase every year and paid at the time of maturity of plan.
The insurance companies declare the regular additions at the beginning of the policy year every year. You can check with the insurance provider the kind of regular additions they have paid over the years. This will give you some idea about the performance of the policy.
As if this is not enough you get maturity addition at the end of the policy term.
In case of unfortunate incident of the death of the policy holder the nominee receives a Guaranteed Death Benefit equal to the sum of all premiums paid till date.
Need another reason to have this plan? You also enjoy tax benefit on both the investment and the returns on plan maturity.
So if regular savings is your idea of investment try the guaranteed savings plan.
I’m a reeirtd life insurance agent. Here’s my advice:[1] The early child-bearing years of a marriage are the ones in which you need the greatest amount of life insurance. However, those years are the ones in which your income is not as much as it will be later on. In later years when the kids are all grown, your house is paid for, etc. you don’t need as much coverage. So your goal is going to be to get the greatest amount of coverage now when you need it the most, for the least amount of premium payment.[2] Since term insurance is much less expensive than regular whole life insurance, let 60% of your life insurance expenditure be for term life insurance and buy regular whole life for the other 40%. Over the years the term insurance premium will increase periodically until it finally reaches an unmanageable amount . But by this time the kids will be out on there own, etc. and your financial position will be greater so that you can afford to reduce or terminate the term life insurance. The regular whole life should be adequate coverage for you then.