One of the most important aspects of a Guaranteed Savings Plan is the addition of guaranteed contributions. These contributions set savings plan apart from traditional savings accounts and make them valuable for retirement planning. This blog post will discuss what guaranteed additions are included in the Guaranteed Savings Plan.
Let’s get started.
An Overview of Guaranteed Savings Plans
Guaranteed Savings Plans are those non-participating plans with an endowment assurance at a certain amount. For a fixed period, you will be required to pay the premium. After the plan matures, you will receive the sum assured plus the guaranteed additions.
Features of Guaranteed Savings Plan
Several features of the guaranteed savings plan make it an attractive choice. Here are some common features of the plan:
➔ Death Benefit
The death benefit is one of the most important features of the guaranteed savings plan. This benefit ensures that your loved ones will receive a death benefit in the event of your passing. The death benefit can be used to help cover expenses like outstanding debts, funeral costs, or other final expenses.
➔ Revival
If you have not paid a premium for more than three years, then also you may be able to revive your policy. This means you would start paying premiums again, and the insurance company would recalculate your final sum and interest rate.
➔ Guaranteed Maturity Benefits
Most guaranteed savings plans come with a maturity benefit, the sum of all premiums paid out to the policyholder upon the plan’s maturity. This benefit is typically higher than the face value of the policy, providing policyholders with a “bonus” for their loyalty in staying with the plan until it matures.
The Guaranteed Additions in the Plan
With a guaranteed savings plan, you will receive additions from your insurance company. These additions can include:
1. Fixed Rate of Interest
The guaranteed savings plan can offer a fixed interest rate, meaning that your contributions will grow at a set rate. This makes it easy to predict how much money you will have saved over time, which can be helpful when planning for retirement or other long-term goals.
2. Maturity Bonus
This is an additional amount you receive when you reach the maturity date of your policy. The maturity bonus is in addition to your policy’s guaranteed and non-guaranteed interest.
You can use the maturity bonus to:
- Pay off any outstanding loans on your policy
- Increase your policy’s death benefit
- Purchase additional coverage
- Take a policy loan
- Receive the cash value in a lump sum
The maturity bonus is not subject to income tax. You can use it for any purpose you want, including supplementing your retirement income.
The Bottom Line
A guaranteed savings plan’s death benefit and cash value are guaranteed to equal the premiums paid into the policy. A guaranteed savings plan can be a good choice for someone who wants the keep their capital safe.
