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Tips to Buy an Affordable Savings Plan with Good Cover

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August 04, 2021

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If there’s one thing that the pandemic has taught us over the last year it is that we’re not really in control. And while we must continue to plan, prioritise and execute based on our life goals, it is also very important to foresee the unexpected. The death of a breadwinner, while emotionally crippling, also leaves behind devastating financial consequences.

All you need to mitigate this unfathomable risk is to invest in a good savings plan that will cater to your family’s needs regardless of the circumstance. Let us understand how a savings plan works.

How Does a Savings Plan work?

Start with these general guidelines:

How much do you need to save? –This requires a significant amount of thought. The general thumb rule is to take coverage that is 20 times your current annual salary. However, this is just a general guideline. You must consider significant expenses in the future along with the expected cost of living to arrive at a number.

When will you need the money? –Priorities vary depending on your age. A young family may be saving for their child’s education requirements, whereas an older couple may be saving for upcoming healthcare needs. Depending on the policy term, the insured can arrive at the premium schedule.

Remember these important points:

  • Your age, health, profession, lifestyle and coverage amount impact your premium payable.
  • Premiums can be paid either in instalments or at one go. However, one has the flexibility to determine how the family will receive the guaranteed amount in the unfortunate event of the policyholder’s demise.
  • While term life plans have lower premiums in general, premiums increase with age. So, the earlier you take a life insurance policy the lower your premiums will be.

Tips to Get the Best Savings Plan Cover

Now that you know how a savings plan works, the next question that arises is which specific plan would work for you. The number of similar-sounding plans in the market, with minor variations, is enough to confuse any average buyer.

Let us now look at some tips to buy savings plans.

1. Reputation:

Review Claim Settlement Ratios of the Company

You must understand the reputation of the insurer in the marketplace. While online feedback and reviews may be a good starting point, one fool-proof mechanism is to review the “Claim Settlement Ratio” (CSR) of the provider.

The CSR is a ratio of the number of insurance claims paid out for every 100 claims received. It is a test of the stability and reliability of their policy issuance and claims process. The higher the CSR, the more reliable the company. Given that term plans are a long-term commitment and your family’s financial backbone in your absence, you must ensure you’re committing to the best!

2. Age:

The right time to take a life cover

Since savings plans also offer life insurance, you should make sure you have adequate cover. If you purchase the plan when you’re fairly young and in good health, you can get higher cover for lower premiums. As you grow older, you may find it difficult to get the coverage you require at a pocket-friendly price.

3. Life Cover:

Factors to consider

As we detailed how a savings plan works, we’ve mentioned the need to consider your specific financial goals while deciding on the amount of coverage. Specifically, your line of work, whether you’re the sole breadwinner, your current and future cost of living based on inflation and financial liabilities like healthcare or education.

In addition, you can consider a line of waivers to manage those sudden curveballs that life throws at you:

  • Disability waiver:

    For those who work in dangerous professions or travel a lot for work, accidental disability is a traumatic life event. Your term policy can cover the costs of your treatment and therapy or money lost due to absence from work.

  • Premium waiver:

    This is especially relevant when the savings plan is intended to pay for a child’s education. In case of the sudden death of the policyholder, the remainder of the premiums gets waived off, while the child gets the payout benefits as intended.

4. Compare plans online!

Aggregator websites are now a way of life. Use it to your advantage. You can lay out multiple plans side by side and compare the features across all of them. Focus on coverage benefits, premiums and waivers. With no worry about paying your agent a commission, these policies are also much easier on your pocket! Once you pay the premium for the policy you like, a soft copy is emailed to you instantaneously.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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