Savings plan with insurance cover

Long-term savings with a life insurance cover thrown in, that is what several life insurance companies are offering today.

If you are looking for an investment plan for your child, or planning a post retirement fund with power to decide the amount and time of withdrawals, you may take a look at savings plans offered by insurance companies.

Generally, all savings plans have two phases: the accumulation (premium contribution) stage and the payout (vesting) stage, with the intervening period being used for growing the corpus through various investment options.

ICICI Prudential, Kotak Life, HDFC Standard Life, Bajaj Allianz, Metlife, Max New York Life, IngVsya Life and a few others offer such savings plans. To invest in such policies, one should not be less than 18 years old. The upper age limit is 60.

ICICI Prudential's 'Golden Years' for instance, offers a specified level of protection (sum assured) and allows investors to put in money in any four available fund options in the accumulation phase. One can choose to pay premiums for a limited term of three, five, seven or 10 years.

The minimum annual premium is set at Rs 60,000 for five, seven and 10-year plans, and Rs 100,000 for the three year term. One can allow one's investments to grow till the age of 75, even after one has stopped paying premiums.

In the payout phase, the investor has the option to defer the vesting age, subject to one's reaching a maximum of 75 years of age. On vesting, one can get one's accumulated money as a lumpsum payment or as structured benefit payments where one gets payments on a quarterly basis for a specified period chosen.

The Kotak Capital Multiplier Plan, on the other hand, offers bonuses every year. During the premium payment phase, the premiums paid by the investor and the bonus declared by Kotak Life are credited to the account, which is invested to fetch attractive returns.

In case one has surplus funds, one can also make lumpsum injections into the policy at any time before retirement.

With the beginning of the withdrawal phase (post maturity of the policy), one has the option to draw the entire proceeds, leave behind the full amount or at least 50 per cent of the accumulation account balance and make partial withdrawals each year for the next 15 years or till the age of 75.

Several companies offer additional life cover in the build up phase, critical illness benefit, loan facility against the policy, early surrender option for medical reasons and various riders including accidental death benefit and permanent disability benefit.

"This may not be the best plan but certainly one of the options one can explore if one is looking around for a savings instrument with a cover," says an insurance executive.