Guaranteed Savings Plan – What are its Eligibility Criteria?

It’s very crucial to plan for the uncertainties of one’s life. For instance, if someone is the sole breadwinner in their family, their untimely demise can leave their loved ones in financial turmoil. Buying a guaranteed savings plan can secure their family’s future even if something happens to them.

What is a guaranteed savings plan?

As the name suggests, a guaranteed savings plan is a non-linked and non-participating insurance-cum-savings plan that offers fixed returns on maturity or the policyholder's death. That is why this plan is also known by the names “guaranteed return plan” and “insurance plan with guaranteed returns”.

One can purchase a guaranteed savings plan from an insurance company and pay yearly premiums. The rate of interest and maturity period is pre-determined at the time of buying the policy.

The eligibility criteria for investing in a guaranteed savings plan

The eligibility criteria for a savings plan may vary from insurer to insurer. Generally, it depends on the policyholder's age, socioeconomic status, and general health, among others. Here are the factors that define guaranteed savings plan eligibility criteria:

• Entry Age

  The “entry age” is the minimum age at which a policyholder is allowed to purchase a guaranteed savings plan. Usually, the entry age for buying a guaranteed return plan in India is 18 years. It means that if a person has attained age 18, they can start to put money in a guaranteed income scheme and manage it on their own.
  
  As a parent, one can also buy a guaranteed savings plan for their minor child. However, the child's parent or legal guardian must operate or manage this plan until it reaches 18 years of age. Once the minor turns 18, they can start operating the policy independently.
  
  Such an arrangement can help parents looking to start investing early to build a sizeable corpus for their children.

• Maturity Age

  The “maturity age” is when a policyholder becomes eligible to receive the maturity benefits of a guaranteed savings plan . The insurer decides the maximum maturity age, which may vary from one insurance company to another. A person will be allowed to buy a guaranteed return plan only if they do not cross the maximum maturity age at the time of policy maturity.
  
  For example, if the maturity age allowed by an insurer is 75 and the maturity period for a policy is 15 years, then only those who are aged below 60 years can buy it. Usually, the maximum maturity age for guaranteed savings plans in India is 60 to 75 years across most insurance companies.

• General Health

  In addition to the entry age and maturity age, an insurer can also look at a person's general health before issuing them a life insurance plan with guaranteed returns. If someone suffers from a serious ailment or a life-threatening disease, the insurance company can deny them the policy.
  
  Sometimes, an insurer can also consider the lifestyle habits – such as smoking, drinking, drug addiction, pre-existing chronic ailments, etc. – while issuing a guaranteed return plan. In such cases, they may either deny the policy altogether or reduce the rate of return.

• Premium paying term

  This is the total number of years to pay premiums for their guaranteed savings plan. This may or may not be the same as the policy’s maturity period, i.e., the number of years a policy matures.
  
  Generally, insurance companies in India offer guaranteed return plans with premium-paying terms of five, seven, or ten years. It’s understood that if a policyholder opts for a shorter premium paying term, their policy’s maturity period will also be shorter.

• Minimum sum assured and premium

  Usually, a guaranteed savings plan comes with a minimum sum assured and a minimum premium amount that is payable every year. A policyholder must pay his amount every year to keep their policy active. However, while the insurance company sets the lower limit of the sum assured, the higher limit will be subject to approval by the company’s board and underwriting rules.

Conclusion

One can invest in a guaranteed savings plan by fulfilling the simple eligibility criteria of the insurer. However, one should consider certain factors before investing in such a plan. These include the maximum maturity age, premium paying term, and minimum annual premium. PNB MetLife offers an array of guaranteed income schemes under their savings plans to help you systematically plan for your future.

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