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Savings Insurance Plans in India

Savings Insurance Plans provide a solution to safeguard your financial future. These comprehensive financial solutions blend the benefits of insurance coverage and systematic savings, offering you a dual advantage of protection and wealth accumulation.

With the aim of providing a secure foundation for your aspirations and protecting your loved ones financially, savings insurance plans are a must in a strategic financial planning.

Let’s discuss the intricacies of savings insurance plans, their features, advantages and the role they play in ensuring a stable and prosperous tomorrow.

What are Savings Plans in Insurance?

Savings plans, particularly in the realm of insurance, are comprehensive financial instruments designed to combine the benefits of insurance protection with the power of systematic savings.

These plans offer the opportunity to secure your financial future by creating a corpus over time and at the same time ensuring a protection for your loved ones. They provide a systematic approach to investing, allowing policyholders to customise their plans to their specific financial goals.

Features of Savings Insurance Plans

The savings plans have a range of essential features that provide policyholders with a robust foundation for their financial goals.

Some of the major features are:

Dual Benefit of Saving and Insurance

Savings plans offer the twin advantage of insurance coverage and systematic wealth creation, thus ensuring financial protection and growth.

Flexible Premium Payment

These plans allow you to choose from various premium payment options like monthly, quarterly, half yearly and annually, depending on your convenience, thus enabling customization based on your financial capacity and objectives.

Assured Maturity Benefits

On the plan's maturity, policyholders receive a guaranteed maturity benefit. Some savings plans also offer bonuses and other guaranteed additions, thus enhancing your corpus and providing financial support for major milestones like child education, retirement, and other major expenses.

Death Benefits

A savings plan provides life coverage, thus ensuring financial security to the family in case of unfortunate demise of the policyholder during the policy term.

Loan Facility

Depending on the plan, policyholders might have the option to avail loans against the policy, providing financial flexibility in times of need.

Additional Riders

You can add riders like critical illness, or disability cover to your savings plans to enhance its coverage.

Benefits of Savings Insurance Plan

The benefits of Savings Plans are numerous and cater to diverse needs of investors.

Here are some of the key benefits:

Financial Protection

Savings plans provide a financial protection, ensuring that your family is financially secure even in your absence. They offer a substantial death benefit in the event of your unfortunate death, thus safeguarding your family's financial well-being.

Tax Benefits

These plans offer tax benefits under sections 80C and 10(10D) of the Income Tax Act, as per the prevailing tax regime.

Corpus Building

A perfect financial solution to build a corpus for various financial aspirations. Through systematic savings and the power of compounding you can build substantial amount to meet your financial goals. Thus, you can enjoy your golden years, go on a dream vacation or fund your child’s higher education without any financial worries.

Disciplined Savings

With a savings plan, you commit to regular premium payments. This fosters a disciplined approach to consistent savings, thus promoting responsible financial management.

Who Should opt for an Insurance Savings Plan?

Financial planning or savings, both are crucial aspect in anyone’s life at any given stage, such as marriage planning, child planning, retirement planning or any other life stage.

Hence, a savings plan is a product relevant for different people, at different life stages and different income levels:

1. People at Different Life Stages

If you wish to build a financial cushion for your family or for your future goals, a savings plan is a wise choice. It's a systematic way to save funds over time, ensuring that you are prepared for upcoming milestones or unforeseen expenses.

2. Young Professionals

Starting early is the key to reaping compounding benefits. Young professionals, who have just started earning, can invest in a savings plan to secure their future. It provides the dual benefit of financial protection and savings, helping you be right on your path towards a stable financial future.

3. People with Dependent Families and Parents

Ensuring the security of your family is paramount. With savings plan, you can have a safety net, ensuring that your loved ones are protected financially, and at the same time helping you save systematically for their future needs.

4. People with Well Defined Long-Term Goals

If you have some defined long-term financial objectives, like buying a house, starting a business, or a comfortable retirement, a savings plan can be the answer. With a savings plan in hand, you can save over a period of time to reach your goal.

5. Risk-Averse Investors

For the risk averse investors, who wish to balance risk and return, the savings plans are the perfect choice. They provide the dual benefit of insurance coverage alongside a savings component, thus ensuring your family's financial well-being.

Factors Affecting Premium of Savings Insurance Plans

The premium that you pay towards a savings plan depends on a lot of crucial factors as below:

1. Age

The chances of age-related illness and passing away increases with age. Hence, the premium of your insurance also goes up with age. So, it is prudent to buy insurance at a young age and lock the premium.

2. Sum Assured

If you opt for a higher sum assured, you pay higher premium. Choose an optimum sum assured that is just sufficient for your financial goals.

3. Lifestyle Habits

People who smoke or drink alcohol excessively have a higher chance of contracting critical illnesses or even premature death. Hence, insurance premiums for them tend to be higher than for non-smokers/drinkers.

4. Medical History

A history of illness for self or hereditary diseases that run in the family like diabetes or cardiac issues, may raise a risk of potential illness and thus increase the premium.

5. Occupation

Some occupations such as mining, carry more life risk and thus attract more premium.

Factors to Consider Before Investing in Savings Insurance Plan

Before investing in a savings plan, you must consider several important factors. Some of these major factors are:

1. Goals

Have a thoughtful evaluation of your short-term and long-term financial goals. Set them if they are not yet, like buying a house, higher education, retirement planning or a dream vacation. Select a savings plan that aligns with these aspirations.

2. Risk Tolerance

Assess your risk appetite and choose a plan that aligns with it.

3. Flexibility

Check if your plan allows you to withdraw money if needed. Also, check for flexibility in premium paying options. Thus, aligning your budget with the financial commitment and making sure, you have the liquidity in case of unforeseen circumstances.

4. Policy Tenure

Evaluate the tenure of the plan. Make sure it aligns with your financial goals' timelines, offering you the required duration for wealth accumulation.

5. Major Plan Features

Analyse the coverage amount provided by the plan and ensure that it is sufficient to safeguard your family's financial obligations. Check for the bonus and returns provided by the plan over time, availability of riders in the plan and explore the customisation available in the plan.

6. Claim Settlement Ratio

Check the claim settlement ratio of the insurer. A higher claim settlement ratio indicates a better claim process, thus increasing the overall brand experience and trust of the insurer.

Thus, a savings plan is a financial instrument that helps to secure your dreams and protect your loved ones financially. By offering a perfect blend of financial protection, systematic savings, and wealth building, these plans empower you to deal with life's uncertainties while building a solid foundation for your future goals.

Explore the range of savings plans available, evaluate your goals vis-à-vis the features of the plan and choose the one that aligns seamlessly with your aspirations.

FAQs About Savings Insurance Plans in India

Should I Pick a Long Term or a Short-Term Savings Plan?

The answer to this depends completely on your financial goal. For a short-term goal like a vacation, you should pick up a short-term savings plan. However, for long term goals like planning for your retirement or your child’s higher education, you can look at investing in a long-term savings plan. However, Savings Plans are traditionally designed for long term investments and give optimum returns when kept invested for a long time.

How do Savings Plan Work?

In a savings plan, a portion of the premium paid by you goes towards insurance coverage, while the other portion is invested to grow over the policy tenure, offering potential returns.

Can I Customize my Savings Plan?

Yes, most savings plans provide customization options. You can choose a suitable coverage, premium amount, premium frequency, etc. as per your choice.

What are the Tax Benefits Associated with Savings Plans?

The premium paid to, and the payouts received from savings plan provide tax benefits under section 80C and Section 10 (10D) of the IT Act as per the prevailing tax laws.

Can I Withdraw Money from my Savings Plan Before Maturity?

Most Savings Plans offer the choice of partial withdrawal or surrender after a stipulated period. However, it does affect the final maturity amount.

Can I Nominate Multiple Beneficiaries?

Yes, you can nominate multiple beneficiaries in a savings plan. The sum assured will be distributed among them in case of your demise.

Can I Take a Loan Against my Savings Plan?

Certain savings plans offer the option to take loans against the policy's surrender value, providing liquidity in times of need.

Disclaimer

This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.