Features of savings plans that you need to know

A savings plan is a form of life insurance investment plan that provides dual benefits of Insurance as well as allows you to multiply your invested amount to increase in a systematic and disciplined manner. With the help of such life insurance plans, an individual would be able to meet his/her family’s future financial demands and ensure the achievement of their financial objectives. Before one selects the best savings plan, it is important to know the important aspects of a savings plan, and they are as follows:

Tenure and Entry age: Savings plans typically have a broader entry age range and a more flexible policy term or investment tenure. The policyholder’s risk appetite for the savings plan is determined by his or her age at the time of the transaction, and afterwards, the best savings plan is tailored to fit the policyholder’s risk profile. Young individuals in their twenties and thirties are willing to take on more risk in exchange for higher returns, and life insurance plans like unit-linked insurance plans (ULIPs) are best suited to their higher risk tolerance. Saving investment plans, such as money-back plans or endowment plans, are better suited for risk-averse investors who want to keep their money safe, even if the returns are low in comparison to other investment instruments. If one chooses long-term tenure in a savings plan, one will be able to accumulate substantial funds during the policy period.

Gives you an option to add riders: Savings plans, such as ULIPs, provide the added benefit of both life insurance coverage and market-linked savings returns, making them a popular savings plan. One can also add specific riders that will help to increase coverage and provide financial protection to your family against accidental death, disability, or severe illness.

Charges: Savings plans include a number of additional fees, and understanding these fees and the expenses associated with specific actions is critical when choosing the best savings plan for yourself. Administration charges, fund management charges, switching charges, mortality charges, premium allocation charges, partial withdrawal charges, discontinuance charges, and other miscellaneous fees constitute additional expenses. While these expenses are unavoidable in certain situations, an ideal savings plan would have the lowest possible charges and provide more flexibility in terms of cash withdrawal, bonus, and policy tenure.

Tax Benefits: The best savings plan must also be effective in helping you save taxes. The premiums paid for most life insurance savings plans are deducted from taxable income up to Rs. 1 lakh under Section 80c of the Indian Income Tax Act, 1961. The savings plan’s maturity and death benefits are also tax deductible under Section 10D of the Indian Income Tax Act of 1961, making it the best tax-saving option. However, you must keep in mind that your annual investment in the plan cannot exceed 10% of the plan’s life cover. For example, if you want to save Rs. 50 lakhs, a guaranteed saving plan will accept that amount as the base life cover and determine your premium. All you have to do is ensure that the annual premium in any financial year does not exceed Rs. 5 lakhs.

Furthermore, you cannot easily deposit more than Rs. 5 lakhs in the plan in any fiscal year. If you do so, the maturity value of your investment will be taxable.

Maturity Benefits: Most savings plans include assured maturity benefits that help the policyholder meet their long-term goals. Also, if you choose the most cost-effective plans on the market, you may receive extra benefits such as complementary additions and bonuses. 

Flexible Premiums: Premiums in a savings plan might be paid on a monthly, quarterly, half-yearly, or annual basis. Savings plan policyholders have the opportunity to choose a schedule of premium payments that works best for them.

Stable and regular return: When a person chooses a savings plan, they may be assured that they will receive a consistent return that will compound over time. The best thing is that the savings plan generates consistent and risk-free returns. This implies you won’t have to worry about losing any money that was promised to you when you chose the coverage in accordance with the requirements provided you pay the premium amount. 

Factors to Consider Before Purchasing a Savings Plan

Know your goals: Everyone’s objectives are unique. One may want to invest for ten to fifteen years, while another wants to invest for twenty to twenty-five. Depending on your goal-setting process, you have several options, including PPF, Fixed Deposits, Mutual Funds, and ULIPs. Most people believe that short-term goals will improve their wealth faster than long-term ones and, hence, narrow down the best savings plan for them.

Death Benefits: When the main breadwinner dies unexpectedly, a family might completely disintegrate. If purchasing life insurance plans is one of your aims, getting the best savings plan may be an investment that provides your family with the consistent income they require after your demise. 

Review Flexibility and Features: Consider the flexibility and added features provided by savings plans. Some plans may let you tailor your contributions, change your investment allocation, or automate savings via systematic investment plans (SIPs). Evaluate the features that meet your needs.  

Regularly Review and Adjust: Finally, remember to check your savings plan on a regular basis and make any necessary adjustments. Financial objectives, market conditions, and personal circumstances may evolve over time, forcing changes to your investment plan. Stay informed, evaluate the effectiveness of your savings plans, and make adjustments as needed to stay on pace to meet your financial goals.

So, we are saying,

A savings plan is a stepping stone to financial success, directing individuals toward their financial goals and protecting their future. Individuals who follow an organized approach to saving, budgeting, and investing can gain control of their finances, build wealth over time, and eventually experience greater financial independence and peace of mind.

 

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