Buying your next pair of dresses? Thinking about the market or the mall you should visit?
Once you are done making a choice of the mall, don’t you take a tour of the entire floor in the mall to see where you will get the clothes of your choice? Same happens when it is about buying expensive jewelry for yourself. It is a common mindset of several individuals to cross verify the quality of the products they are willing to purchase. Just like jewelry or clothing, insurance is also an important subject to explore when you are buying it.
Most of the things you buy in life are from the perspective of benefit that helps the whole family. Isn’t it? You would want to secure the family’s life both when you are alive or after when you are not there to take care of the loved one’s. Savings insurance is one such policy that allows you to save funds for the future and keep the family financially protected in future.
Let us see in detail how the policy assists you in life and what are the factors you must consider before buying the policy.
Table of Contents.
- What is a Savings plan?
- Crucial factors to consider when buying a savings plan.
- Benefits of the savings plan.
What is a savings plan?
A savings plan is an insurance policy that provides you a combination of life cover as well as an opportunity to save funds in life. The insurance policy gives you a maturity benefit at the end of the policy period. Apart from the money saved, the policy provides comprehensive life protection to the family after anything happens to the life insured. The insurance company pays the sum assured as life cover to the nominee after the death of the life insured.
The policy also allows the life insured to accumulate the funds over a long period of time. These funds can be used to pay for both your long-term life goals as well as short-term goals.
When the savings plan can bring these benefits, it is important that you buy the policy with utmost care.
You must explore and evaluate savings products that are available in the market. Consider a few factors before buying the policy.
6 Crucial factors to consider when buying a savings plan.
Buying a savings plan is about selecting the best savings financial instrument that will keep your money safe over a long period of time. Before you put your money via a plan, it is important that you evaluate these crucial factors.
- Important features and benefits of the endowment plan: Before you finalize an endowment plan for yourself, you must evaluate the important features of the plan. The main feature of the endowment plan is to save and plan for the future. After the maturity, a lump sum amount is given to the life insured. You must be aware of what benefits you will fetch after paying the premium for the complete policy tenure.
- Evaluate the need of the savings plan: A saving plan can come with different benefits. You must evaluate your need for the savings plan and then save money for the future. Once you are clear with the life goal, you can choose the life cover, policy term and premium paying term accordingly.
- How much safety are you creating for your loved one’s: For a savings plan, your major intent is to save money for your loved ones. It should be clear in your mind, how much financial capacity will help them attain their future goals after a period.
Establish the monetary security you will leave behind. Saving for an unforeseen future is an unexpected challenge. Once your target or goal is identified, you must be clear with how much monetary security you have to create after buying the savings plan.
- Premium paying capacity: Deciding on a savings plan is deeply impacted by one fact, that is, your premium paying capacity. If you can pay the premium for long years, you must buy a long term investment savings plan. For short term goals, you can choose the cover accordingly.
- Insurance Company’s Profile: When you are buying a savings plan, it is important that you be sure of services you will get. The quality of service will depend on the insurance company’s profile.If the Solvency Ratio and the Incurred Claim Ratio of the company is high, you are on the right track of choosing the product.
- Premium payment term: The tenure or the years for which you will have to pay the premium is called the premium paying term. See for how long you can bear the cost of premium and then decide the payment term.
Are Endowment Plans a Good Investment Option?
Investment is a subject matter that attracts the maximum amount of discussion and concern. Ever thought why?
It is because for investments you put your hard earned money and expected returns after the investment.
Now when it comes to endowment plans, yes these are good investment options. Endowment plan or savings plan provides in you a disciplinary action of investment and savings. The matter is for long term duration and is suitable for the individuals who make regular monthly income.
If you are looking for a huge amount of money after a certain amount of time, then a savings plan is an appropriate purchase for you.
Once you are determined to invest your money in the savings plan, the next concern to ponder is what are the right situations for which you should buy a savings plan.
Right Situations to buy a Savings Plan.
The right situation to buy a savings plan include:
- When the prime intent of the life insured is to first protect and ensure the financial security for the family/dependents in the family.
- Second, when you have a long term objective for which you will need funds.
- Third, when the aim of life is to invest, save, and protect the family members.
The situation of buying a savings plan can be either individual or a combination of all three.
Benefits of Savings Plan
These are the popular benefits of the savings plan:
- Guaranteed Maturity Benefit
The savings plan provides guaranteed maturity benefits. These are receivable at the time of death or at the end of the policy term. The maturity amount you will receive include sum assured on maturity or accrued guaranteed additions.
- Guaranteed Annual Additions
The endowment plan provides guaranteed annual additions that are accrued on a monthly basis. These guaranteed yearly additions are payable only when the life insured passes away or the maturity arrives, whichever happens earlier.
The additions are made provided all the due premiums are paid. These guaranteed additions are based on the policy premium amount that you promise to pay, sum assured, entry age of the life insured, joint life or individual protection.
- Life Coverage: The life coverage under the insurance policy provides life protection cover. It implies that if anything unfortunate happens with the life insured, the nominee will get the sum assured as the death benefit.
- Flexibility: No other insurance policy provides you this comfort. The savings plan provides you a flexibility to shift from long term goals to short term based on your requirements.
The policy term and the premium payment term are also flexible. These can be chosen to suit your needs.
- Facility of loan under savings plan: The life insured under the savings plan has the feature of facilitating loan. The policy gains a cash value after 2 years. This cash value increases over a period of time. In case of emergency, the life insured can get loans against the policy.
- Tax benefits: All the premium paid under the insurance policy is eligible for deduction up to a maximum of Rs.1.5 lakhs. The deductions are permissible under Section 80C of Income Tax Act, 1961.
Whether a savings plan or any other life insurance policy, to avail the benefits of the insurance plan, it is important that you understand the policy terms and conditions. Clear understanding gives you a view of the road ahead in terms of premium payment, benefits, sum assured,etc. If you are looking to buy a savings plan to protect your future aspirations, read about the savings insurance.