With rising living costs and inflation rates, building the right kind of financial portfolio from early on is the need of the hour. A life insurance savings plan is one of many useful financial products in India that you should consider adding to your portfolio. A life insurance savings plan is an investment choice that combines the advantages of insurance and saving. The premium paid for such a plan is used to provide life insurance for the policyholder for the set tenure, known as the policy term. If the policyholder dies within this term insurance policy period, the insurance company pays the amount of life cover (or the sum promised) as a death benefit to the nominee named in the policy. However, if the policyholder lives the policy period, all premiums paid, as well as bonuses and loyalty adds, are paid out as maturity benefits.
This type of insurance provides a variety of benefits that we will be discussing in this post.
Why Consider a life Insurance Savings Plan?
Here’s a closer look at life insurance savings plans and the key benefits of investing in them.
Provides Financial Protection for Your Family: The insurance component of the best savings plan protects your family’s financial future in the case of your death. The death benefit payout received by your family could be used to cover bills and achieve their financial goals.
Guaranteed returns: Unlike market-linked investment choices, life insurance savings plans provide guaranteed returns at the end of the policy period (if the policyholder survives). You won’t have to worry about completing your goals on time because of the guaranteed payout. In addition, the amount of the maturity benefit is stated when you purchase the insurance. Such clarity allows you to arrange your budget much more effectively.
Availability of Customisable Plan Options: Individuals have different financial goals, preferences, and capacities. To fit in your specific financial needs, you can tailor your life insurance savings plan. Almost every feature of a savings and investment plans in india can be easily customized to meet your specific needs, from the assured death benefit amount and premium payment frequency to the premium payment term & policy term itself. You can also increase the benefits of a life insurance best savings plan by adding riders.
Tax benefits: In India, life insurance savings plans are one of several ways to save income taxes. The premiums you pay for such a plan can be deducted u/s 80C of the Income Tax Act. Each financial year, you can get a deduction up to Rs. 1.5 lakhs from your entire income. This substantially reduces your total taxable income and therefore your tax liability for the year. Furthermore, under Section 10 (10D) of the Income Tax Act, death benefit and maturity benefit payouts (for policies with yearly premiums of up to Rs. 5 lakhs) are fully tax-free.
Option to get a loan against the policy: Life insurance savings plans are not only one of the best income tax saving alternatives in the country, but they can also help during financial difficulties. If you run out of money, you can borrow against your life insurance coverage. Furthermore, because it is a secured loan, the interest rate is typically substantially lower than for unsecured loans.
5 Tips for Choosing an Insurance and Savings Plan
Now that you’ve learned everything there is to know about savings plans let’s look at a few pointers to help you make an informed decision.
1. Determine your investment aim: Before you choose the best savings plan, make sure to set an investing goal. This will allow you to choose the plan that is capable of meeting your objectives. For example, if your goal is to save for retirement, you could select a non-participating savings plan that provides guaranteed returns.
2. Ensure that the policy term aligns with your purpose: Once you’ve determined your investing goal, the following step is to ensure that you choose a policy term that aligns with it. Only then will you be able to employ the plan’s mature benefits to achieve your life goals. For example, if your ultimate goal is to provide for your child’s higher education, you should select a policy term that aligns with that.
3. Consider your wants and needs: Some savings plans pay out a big sum at maturity, while others provide you with a consistent stream of income after a set period of time. They are also tax-saving instruments. As a result, choosing the best plan for you will only be possible if you consider your wants and requirements beforehand.
4. Consider your risk appetite: A savings plan can be either participating or non-participating. As a result, in order to select the best option for you, you must first examine your risk tolerance. For example, if you’re a conservative investor, consider non-participating savings plans, which provide guaranteed income.
5. Select enough life cover: A savings plan is primarily an insurance product, but it also provides an option for online investing. As a result, while choosing a savings plan, make sure to purchase a life insurance policy that is sufficient to meet your family’s life goals.
Conclusion
Many people see life insurance policies solely as a kind of financial protection for their families. While this is true, life insurance policies can provide more than just protection. Interesting, isn’t it? Savings plans are a form of life insurance plan that is meant to help policyholders develop a disciplined saving habit while earning significant returns. It allows you to protect your and your family’s financial future by enabling financial independence. It gives financial security, allowing you to take calculated risks. If you want to get the most out of life insurance savings plans, you should start when you’re still young and healthy. This is because the premiums for these plans tend to rise as you age. Purchasing life insurance sooner allows you to take advantage of lower premiums and drastically cut your overall costs.
