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Aditya Birla Sun Life Insurance Company Limited

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Aditya Birla Sun Life Insurance Company Limited

What are Non-Guaranteed Savings Plans?

A non-guaranteed savings plan is a limited-term insurance policy with an unreliable and potentially fluctuating premium payment. In other words, the premium an investor pays for the first few years of the policy might climb after a few years.

For instance, if you purchase 20-year non-guaranteed saving plans, you could be required to pay a certain premium for the first five years. Depending on the state of the market during those 15 years of the policy's term, the insurance provider may charge you a higher premium.

Consequently, you will have to pay the insurance provider a higher premium for the same policy, but the benefits promised when the plan was purchased would not change.

How do Non-Guaranteed Saving Plans Work?

Non-guaranteed saving plans help you save money daily in addition to offering death benefits. In this sense, it functions in the same way as most term insurance policies. The policyholder will get a lump sum payment when the insurance matures, provided they have survived the policy period. This sum can help you cover home purchases, child care costs, retirement, etc.

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Buying the insurance:

You purchase non-guaranteed saving plans by selecting the insured amount, coverage period, and term during which premiums are paid.

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Plan Amendments:

The insurance firm declares a bonus for participating policies. There may also be other kinds of additions included in the plan's benefits.

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Death during the period:

The death benefit is given if the insured person passes away while the plan is in effect. The cash promised, bonus (where applicable), and any other additions to the plan comprise the death benefit.

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Policy maturity:

The plan matures, and a maturity benefit is provided if the term expires. The benefits typically include the money guaranteed¹, the bonus (if applicable), and any additional modifications included under the plan.

Non-Guaranteed Savings Plans’ Claims Procedure

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Any nominee or beneficiary must first notify the insurance company of the death of the Policyholder.

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The death application form must be completed and sent with the original policy documents, a copy of the bank passbook or cancelled check, the claimant's address, a photo ID verification, and the life-guaranteed death certificate. There is a simple download for the claim form component.

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If the death resulted from a medical condition, you would need to give additional paperwork, such as a doctor's statement, a certificate from the hospital that treated the patient, and a certificate from your place of employment, school, or college. In a catastrophic accident, the claimant must provide a copy of the FIR, PMR, or police investigation report. Affidavits must authenticate all papers.

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After receiving a completed claim form, the insurer will register your claim.

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They will contact you after the paper’s have gone through an adequate evaluation.

Non-Guaranteed Savings Plans Benefits

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Insurance coverage:

A Non-guaranteed saving plan offers insurance coverage for the duration of the policy term.

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Payout in one lump sum:

When the insurance reaches maturity, it provides a lump sum payout (i.e., at the end of the policy term).

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Dual Benefits:

A non-guaranteed saving plan has two parts for you since, in addition to acting as an insurance policy, it also provides you with a long-term investment advantage.

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Tax Benefits²:

You are eligible for a tax exemption on both premium payments and maturity and final payouts under Sections 80C and 10(10D) of the Income Tax Act of 1961.

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Low-Risk Investments:

Unlike other investment options, non-guaranteed saving plans are considered a significantly safe investment.

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Long-term Savings:

Long-term savings are available with a non-guaranteed saving plan. Term periods can range from 10, 15, 20, 30, or 40 years.

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Multiple Riders:

Non-guaranteed saving plans allow you to add riders and tailor your insurance by including benefits for critical sickness, premium waiver, family income benefit, accidental death benefit, and permanent complete or partial disability benefit.

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Additional Bonuses:

Bonuses are also announced by insurance firms. The bonus, in this case, refers to the additional sum of money added to the profits given to a policyholder by an insurer.

Maximising on Non-Guaranteed Savings Plans

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Start early with your planning:

When investing, "the sooner, the better" is always the rule since it provides a long horizon for your investment to develop. As a result, the insured can accumulate larger funds and practise disciplined saving.

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Choose a plan with riders:

Some insurance providers provide riders as a standard feature; one should never pass up this chance to get advantages.

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Examine the flexibility choice:

There are many flexible premium variants when it comes to non-guaranteed saving plans. For example, suppose a person is salaried. In that case, they may pick a regular non-guaranteed savings plan, but if their income is sporadic, they can choose a single or restricted premium payment option

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Bonuses:

The insurance firm will announce bonuses based on how the business has done. After each fiscal year, the insurer distributes a portion of the profits from its investments to policyholders. The insurance company's profit is based on assessing its assets and liabilities.

Choosing the Right Non-Guaranteed Savings Plan

There are many different kinds of non-guaranteed saving plans in the market. However, there are several things that a person should consider before selecting the best non-guaranteed saving plans.

When selecting non-guaranteed saving plans, factors including income, needs, stage of life, and risk tolerance should be considered.

The cost of the premium is also essential since non-guaranteed saving plans have more expensive premiums than other investing options. Other considerations include the insurance company's track record regarding bonuses, customer service level, how often claims are settled, financial standing, etc.

You should choose a non-guaranteed saving plan that is straightforward and without complicated features and advantages.

FAQs related to Non-Guaranteed Savings Plan

Yes, the policyholder is eligible for tax advantages since Sections 80C and the benefits received are covered by Section 10(10D). You can claim up to ₹1,50,000 on your taxes.

Yes, almost every insurance provider now sells their plans online. These can be purchased after an online KYC is completed.

You may buy a non-guaranteed saving plan online through the insurance company's main website. You may locate them offline or on unofficial websites if not on the official website.

Yes, if the plan has accrued a surrender value, typically taking 2 or 3 years depending on the plan duration and period of premium payments. You will be qualified to receive either the exceptional surrender value or the guaranteed¹ surrender value once you surrender the plan, depending on which is greater of the two.

Yes, you are the policyholder in this instance, and if you pass away, the child will get a lump payment.

If a Non-guaranteed saving plan has accrued paid-up value, you may exit it. You are given a surrender value upon surrender, which is determined by multiplying the paid-up value by a surrender value factor. The insurance company chooses the element. You shall be entitled to a surrender value upon cancellation of the policy that exceeds the Non-Guaranteed Surrender Value (NGSV). The NGSV is the present value of the paid-up sum assured, discounted at the gross redemption yield at the review date immediately before the date of surrender, plus 2% annually.

  • Your age: The earliest age you can purchase plans is your "entry age." The age may range from a minimum of three to eight years to a maximum of seventy to eighty years. However, it's crucial to remember that the age of entry might vary depending on the firm providing the savings plan. Therefore, you must confirm the same before deciding which investment plan to choose.
  • Option for non-guaranteed savings: This plan has no minimum entry age and may be created and maintained by a guardian on behalf of the account holder. The child may start using it alone when they become 18 years old. Parents who want to start investing early so that their children will have a significant corpus in the future are best served by this. The entry age restriction is 60.

A note on savings with double protection or premium protection: These are guaranteed1 if you are at least the appropriate age. As a result, the holder's consent is needed to open the account. The maximum entrance age for double protection is 60 years old, but it is 55 years old for premium protection plans.

Non-guaranteed income, also known as variable income, refers to revenue that is dependent on market conditions and isn't guaranteed to remain forever. This income might come through scheduled withdrawals from mutual funds, dividends from equities, stock appreciation, interest from bonds or bank accounts, and rental property income. The overall revenue is still dependable even if it isn't guaranteed.

A few examples of non-guaranteed savings plans include:

  • Dividends on stocks: Dividends received from equities after retirement are a source of non-guaranteed income. One thing to watch out for is when a business distributes many of its profits as dividends. The corporation would have to reduce the dividend distribution if its earnings decline.

    Suppose you want dependable dividend income in retirement. In that case, you should think about assembling a portfolio of stocks from various sectors, such as communications, industrials, and consumer companies, with the help of an investment manager or financial adviser.

    By doing this, your other dividends may continue to flow even if revenues or dividends in one business are reduced. Your dividend stock portfolio's diversification will likely increase how stable of an income you may anticipate.
  • Increase in stock value, or stock appreciation: If you hold a company or group of stocks that have appreciated considerably, you could think about selling some of that gain to cover your living needs.

    If a large portion of your wealth is invested in a single, highly appreciating stock, selling a small amount of it each year will not only allow you to cover living expenses, but you may also want to work with a financial advisor to reinvest some of your "winnings" in a diversified portfolio of stocks to lower the risk of losing all of your money if a single store performs poorly.
  • Bond interest payments or bank account interest: Generally considered "safer" bonds, government-backed or investment-grade corporate bonds may provide less income, but your nest egg will be maintained. By doing this, you may be able to benefit from an impending real estate downturn and rest easy knowing that some of your capital is secure.

    The money you will need for spending over the following year should be kept in a savings account (even if it earns little or no interest) or short-term Treasury bills.
  • Income from Rental Property: The majority of wealthy households often possess a variety of real estate. Real estate may produce significant current revenue when adequately managed.

    Although it may not be wholly guaranteed, if you have a varied portfolio of rental properties, little to no debt, and capable management staff, you should be able to maintain a reliable income throughout retirement.

  • Your pictures - if you purchase the coverage for someone else, pictures of the life are covered.
  • Identity of insured person evidence
  • Evidence of the insured's residence
  • Evidence of the insured's age - if you choose a high guaranteed¹ level and pay higher premiums, income-related papers.
  • Aadhar card and PAN card

Anyone who wants to combine the benefits of savings and life insurance should consider getting a non-guaranteed savings plan. These plans are also appropriate for people who have a low-risk tolerance, and high disposable income.

¹ Provided all due premiums are paid.
² Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
ADV/8/22-23/1192

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