During our childhood days, our parents introduce us to the concept of savings. With savings, we could set aside a little money regularly and enjoy the benefits of a lump sum corpus in the future. As we grow up, we realize how beneficial the act of savings can be for us and assist us in meeting our long-term financial goals. Insurance companies have realized this fact and have launched the life insurance savings plan.
What is a Savings Plan?
A savings plan is a life insurance plan that provides us with the ability to save and gather funds to build wealth and offer insurance coverage for our loved ones. These insurance-cum-investment plans are designed to help policyholders build a saving habit and get significant returns when they need it the most.
If you’re considering buying the best savings plan for yourself, you must learn about the optimal features they offer.
Top Features of a Savings Plan
- Assured returns: A savings plan in the market will offer you assured returns. This means you will always have a clear idea of the minimum amount you will get when the plan reaches maturity. When you understand how much you will get, you can plan better for your important life goals with these plans. Since these plans come with guaranteed returns, you will only have to worry about keeping up with the premium payments.
- Tax benefits: Tax benefits are one of the most crucial aspects of the life insurance savings plan. The best savings plan will offer tax benefits in the following ways:
- The premiums paid towards the plan are deductible from taxable income as per Section 80C of the Income Tax Act.
- The amount obtained through the maturity or death benefit is tax-free under Section 10(10D) of the Act.
- You can invest any amount without missing out on the tax-free status of the maturity amount.
Therefore, if you opt for a savings plan, your goal amount could be completely tax-free. However, you must remember that your annual investment in the plan must not go above 10% of the life cover in the plan.
- Life cover payout to the beneficiary: With a life insurance savings plan, if the policyholder meets their untimely demise before the policy’s tenure is over, the loved ones will receive the death benefit plus any bonuses accrued, and the policy will discontinue. This will ensure that your loved ones can continue a financially secured life, even in your absence.
- Investment flexibility: A savings plan will allow you to make investments in the way which is suitable for you. For instance, if you earn a monthly income, you will wish to invest every month. However, if you wish to make lump sum investments, you may do so either quarterly or annually. Along with this, your financial goals in life may change when you reach different stages of life. With the limited pay option provided through savings plans, you get the flexibility of investing in a plan for a limited period. You can also increase your investment amount as your income grows.
- Entry age and tenure: Savings plans offer a wider entry age bracket along with a flexible policy tenure or investment term. The age at which you begin the plan will determine the amount you invest. Young individuals can start with a low investment amount as they have a longer tenure for the compounding to take effect. Individuals who are a bit old may want to invest a higher sum with either single pay or limited pay feature to ensure assured returns in their old age.
Along with this, opting for a long tenure of the savings plans allows individuals to build significant wealth during the policy’s term.
Hence, with a savings plan in place, you can build a significant financial net for yourself and ensure the security of your family when you’re not around. The money savings plan provides multiple features like investing as per our requirements, premium protection and tax benefits. With these features, picking the best savings plan should not be a difficult problem.