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Need assistance in choosing the right insurance plan? Get a call from our Expert.

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5 Things to Consider While Buying a Guaranteed Savings Plan

As we move through the different stages of our lives, our financial goals change and we need to adapt our savings strategy accordingly. The ideal approach would be to systematically plan and implement the strategy so that adequate funds are available at the right time to meet our various needs.

Whether the goal is to meet the expenses related to the higher education of children or their weddings, to build an emergency corpus, or create a retirement basket, the key is to accurately determine the requirement of funds and save regularly to fulfil that requirement in time. A savings plan is a suitable method to save for any financial commitment while affording protection to your family against any unfortunate eventualities.
 

What is a Life Insurance Savings Plan?


A savings plan can be defined as a financial product that allows you to contribute funds according to your preferences and financial capacity with the objective of creating a corpus for the future. Furthermore, a modern iteration of savings plans, namely, savings insurance plans, offer you a life cover and the option to add a critical illness cover to your savings plan. These features can be of great assistance to you and your family in the event of your unfortunate passing during the policy term.
 

What is a Guaranteed1 Savings Plan?
 

As opposed to a basic term insurance policy, a guaranteed1 savings plan combines life insurance with guaranteed1 returns. The fundamental reason for choosing a savings insurance plan is building an endowment from which you can draw returns at the end of the premium payment period. Guaranteed1 savings plans help individuals build a fund for their projected future financial needs while simultaneously affording them life coverage.
 

You can choose from several guaranteed1 savings insurance plans, such as guaranteed1 regular income plans, assured returns plans, endowment plans and so on.
 

Factors You Must Consider While Choosing a Guaranteed1 Savings Plan
 

  1. Choose a plan as per your financial goals


    You must choose a plan according to the timeline of your financial commitments. Thus, you must estimate the outflows and the time by which you would need the returns from the plan. The premium payment term can be between 5 years and 12 years and the income period can be up to 40 years.
     

    You can use the online premium calculator like the one available on the Tata AIA website. Based on your requirements, the calculator can help you determine the premium payable so that you can select the appropriate plan.
     

  2. Select a plan with flexibility in payouts


    It is important to look for a plan that has flexibility in payouts because it can assist you when required. When you receive a one-off sum of high value, it is better to choose a guaranteed1 return plan with a single premium option than a bank fixed deposit because the post-tax* yield to maturity of Long-term Fixed Deposits tends to be lesser than that of a guaranteed1 return plan.
     

  3. Choose an enhanced premium payment term


    Guaranteed1 return plans are a good bet to overcome the volatility of the short-term interest rates provided by most instruments, provided you choose a premium term that is more than 5 years.
     

  4. Consider the tax* benefits of the selected plan


    The premiums paid on guaranteed1 return plans are eligible for a tax* deduction under Section 80C of the Income Tax Act, 1961. You must ascertain the tax* bracket you fall under and if it is the 20% or 30% slab, the investment in guaranteed1 income plans can be very useful. Moreover, the returns are around the 5% to 6% range which is quite reasonable when interest rates are falling.
     

  5. Choose a plan with adequate life coverage and add suitable riders#


    Always remember that you should choose the optimum coverage by also considering your health status and include the appropriate riders#  in the plan. It is also important never to default on the premium payment. If you wish to opt for a plan with a lesser risk profile but a long-term return period, guaranteed1 returns plans are the ideal solution. Besides helping you meet your financial goals in a systematic way, they offer good inflation-adjusted returns.
     

Here is How a Guaranteed1 Savings Plan is Useful
 

Guaranteed1 savings plans have several advantages, some of which have been discussed below.
 

  1. Life cover along with assured and regular income


    Guaranteed1 savings plans comprise the features of a life cover and assured returns. In this sense, these plans are quite unique. There are many savings schemes but none that offers the twin benefits that are available with these plans.
     

  2. The flexibility in the mode and term of premium payment


    The second advantage of guaranteed1 return plans is the flexibility related to the mode of premium payment, term of premium payment, type of payouts, and the option to select additional riders#. You can choose to pay the premium at monthly, semi-annual, or annual intervals. You can pay a single premium or for a limited number of years.
     

    The single premium payment option can let you park spare funds into a savings plan. With these plans, the payouts can be in the form of a lump-sum amount, monthly income, annual income, or a combination of lump sum and periodic returns. By timing the payouts for different milestones in life at which you expect to need funds, you can meet those obligations without delays.
     

Conclusion

Life cover is essential to protect your family from the financial obligations that might arise in the wake of your passing. However, life insurance can also be conveniently combined with savings to prepare for attaining the aspirations of your family members as well as your personal life goals, including a stress-free post-retirement life.
 

There is no such thing as the best guaranteed1 savings plan since the right plan for you depends on your financial goals and financial capability. By choosing a plan with a specific timeline and appropriate regular returns, you can ensure that no brakes in the form of unexpected circumstances stop your family members from pursuing their dreams of being financially stable.
 

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch.