Savings plans combine insurance protection with savings. You pay annual premiums for a fixed term, and at maturity you receive the sum assured plus bonuses. These plans provide life cover throughout the policy term, ensuring your family is protected if something happens to you. The savings component grows through bonuses declared by the insurer.

Bonuses are the primary way savings plans generate returns. A reversionary bonus is declared each year and added to your policy. Once declared, it becomes guaranteed. The bonus rate varies by insurer and depends on their investment performance, expense management, and mortality experience. Some plans also offer a terminal or final additional bonus at maturity.

If you stop paying premiums before the term ends, your policy acquires a surrender value after 2-3 years. The surrender value is typically lower than the maturity value, especially in early years. Paid-up value is another option where the policy continues with a reduced sum assured based on premiums paid. It is generally better to continue until maturity for full benefits.

Maturity proceeds from life insurance plans are tax-exempt under Section 10(10D) if annual premiums are within prescribed limits. For policies issued after April 1, 2023, the exemption applies if total premium does not exceed 10% of the sum assured. Premiums paid also qualify for deduction under Section 80C up to ₹1.5 lakh per year.