Guarantee is a wonderful term, particularly when you spend your hard-earned money on something. For instance, you would prefer a refrigerator with a five-year guarantee to another with a two-year guarantee. The same idea applies to your investments – you want something that can give you good returns assuredly. A Guaranteed Savings Plan can do exactly that for you.
Now, if you have been considering a Guaranteed Savings Plan, then you must have come across the term ‘sum assured.’ Let’s help you understand more about this term.
What exactly is ‘sum assured’ in a Guaranteed Savings Plan?
The sum assured refers to a predetermined amount that is payable to a beneficiary or policyholder in case of an insured event. To elaborate further, a maturity sum assured refers to the amount the client gets from the insurance provider under an insurance policy after an insured event (for instance, death) occurs. The sum assured is not the same for all policies and is an important factor to consider when choosing a Guaranteed Savings Plan.
Choose an adequate sum assured for a safer tomorrow
Understanding the finer nuances of a savings plan isn’t easy. However, the most important thing for you to remember is that a savings plan isn’t something you opt for just to tick a box off on a financial investment checklist.
You need to understand the importance of choosing a policy that has a sufficient sum assured. For the primary breadwinner of a family, financially safeguarding the family is crucial. Due to this reason, you need to consider all the criteria when deciding on the right sum assured.
Guaranteed Savings Plans can cover disability, sickness, and death. The most important thing is to buy a plan that not only meets your needs but also offers an adequate sum assured while staying within your means.
How to select the right sum assured
You need to consider a few things to decide on the right sum assured for your needs, and they are:
Consider the expected earning years left
Your Guaranteed Savings Plan is a replacement tool for your income. Thus, consider how many years more you must earn and figure out how much you are going to need when you aren’t earning any income.
Get an idea of your yearly expenses
Consider all the ongoing and current expenses, such as fuel bills, utility bills, groceries, healthcare, vacations, and more. The aim is to understand your recurring expenses. You need a sum assured that can cover all these yearly expenses, even while factoring in the effects of inflation on the expenditure.
Add the liabilities and subtract the savings
Consider all the liabilities, from home loans to car loans. Now, factor this amount in with the ones mentioned before. Subtract your present insurance cover and savings from the calculation to get the right sum assured.
Hopefully, you’ll have a better idea about the right sum assured and how to choose the right amount for this purpose.