Features of Savings Insurance Plans that You Should Know

Savings insurance plans are a type of life insurance that offers the opportunity to build and safeguard funds for your future. It aids you and your family to meet financial goals of both short and long terms. These investments are organized and disciplined to achieve your financial goals. Being a life insurance product, savings plans have numerous life insurance benefits such as death benefits, tax benefits, terminal ailment benefits, and so much more. According to data collected from Handbook on Indian Insurance Statistics, 2016-17, of the IRDAI, around 75% of Indians (988million Indians) are not covered by any life insurance. To ensure financial security and good returns by selecting a plan suited to your needs, it is advisable to know the crucial features while investing in saving plans.

What Are Savings Plans?

Savings plans are dual feature life insurance plans. They allow you to enjoy life cover while also providing you with avenues to save and build up a corpus for the future. These plans are ideal for individuals who want to secure their family’s financial future. They differ from regular savings or investment avenues as they also provide life cover. So, if anything happens to you during the policy term, your family will receive the insurance payout. The money will provide them with financial stability in their time of need.

Features of Savings Plans

Every good savings plan will offer you the following features or benefits:

1. Maturity Benefit

Individuals opt to put their money in a savings plan because they crave financial stability. Your maturity benefit refers to the amount you will receive at the end of the policy term. Depending on the plan variant you pick, you may enjoy a minimum sum guarantee for your maturity benefit. Some plans also provide other additions or bonuses that increase your corpus.

2. Life Cover

Savings plans have become popular today since they do more than grow your money. These plans also provide life cover, which is especially important for earning family members. With this additional benefit, you can secure your family’s future even in your absence.

3. Retirement Savings

Most savings plans will help you build a significant corpus for your retired years. If you start saving up as soon as you begin earning, you will have a substantial sum to fall back on once you hang up your working boots.

4. Tax Benefits

Most importantly, savings plans allow you to save on your taxes under Section 80C of the Income Tax Act. You can deduct money that you put into your savings plan from your taxable income. Depending on the savings plan you opt for, you could even enjoy a tax-free maturity benefit under Section 10(10D).

Tenure of policy and entry age

Personal factors like age are vital in determining the amount of risk you can take. People in their 20s or early 30s have the window to choose profitable returns at a higher risk. They can opt for aggressive investments like equity. ULIP (Unit Linked Insurance Plan) is suited more for young investors who are equipped and willing to take financial risks. Whereas for conservative investors who prefer having guaranteed money security even at lower returns, money-back plans or traditional endowment plans are more suitable. Generally, savings plans offer a flexible investment tenure or policy terms that range from mid-to-long-term investments. This helps in accumulating remarkably over the entirety of the policy. Depending on the age of the investor and the fluctuating nature of earnings and savings, most insurance companies offer the chance to change the investment amount or premium as per convenience.

Investment options

Different plans facilitate different life insurance benefits. One can opt for high risk instruments like equities or choose safer instruments that involve fixed interest security such as corporate bonds, government securities or the money-market investments. Depending on one's specifications, few investment options provide a precise cover ranging from 5-10 years to 30-35 years, while others offer cover for the entire life.

Tax benefits

It is important to choose beneficial savings insurance plans carefully as they also work as a tax saving instrument. Under Section 80C of the Indian Income Tax Act, 1961, the premium paid for most savings insurance plans is deductible from your taxable income to a maximum limit of Rs.1 lakh. Under Section 10D(D) of the Indian Income Tax Act, 1961, maturity claims and death benefits of endowment plans are eligible for exemptions.

Added riders and life cover

Savings plans such as endowment plans offer guaranteed maturity benefits along with bonuses as life insurance benefits. In addition to yielding fixed deposit, they build safety cushions to cover the insurance risk with added riders. Money back plans provide dual benefits of insurance and redeeming of money at a regular interval. These plans are meant for those who require money to meet short or long-term needs, such as to buy a house or car. A ULIP is a market linked plan that incorporates the protection of insurance with many wealth-generating opportunities. A part of the investment in ULIP goes towards providing a life cover, and it also offers tax benefits.

Premium costs

While selecting a savings insurance plan, it is important to note the costs and expenses that are involved. Under inevitable circumstances, there are extra charges in account for administration expenses, mortality expenses, premium allocation expenses, fund management expenses, partial withdrawal expenses, switching or discontinuance expenses and various other expenses. Although, the best savings plans charge minimum expense and offer flexibility with respect to cash withdrawal, policy terms and receipt of bonus.

Conclusion

Regardless of the life stage and financial goals, it is crucial to invest in savings insurance plans. You must consider the factors listed above to decide the kind of plan that would be best aligned to your financial objectives. Such a plan would not only provide you with mental peace while you focus on current financial obligations and your career, but also help your family to stay secure in the long term.

HDFC Life Sanchay Plus Plus is a savings insurance plan that is not market linked and serves a variety of  financial objectives. In the event of the policyholder’s demise, it provides protection to the family and covers all expenses. It allows you to opt for payout either as a lump sum amount or in the form of regular payouts. Under the life-long income option, you can get a fixed income till the age of 99, or you can choose a long-term income option and get your payout over a period of 25-30 years.

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