Savings Plan Buying Guide
1What is Savings Plan? Savings Plans are essentially life insurance plans that offer you an opportunity to save and build a corpus to meet your future needs. These are designed to help policy holders develop a regular savings habit, as well as give significant returns when you need them. In addition, savings plans offer insurance coverage, which means your family's financial needs are met even if you are not around to support them. Savings plans usually give a fixed amount of maturity benefit when the policy term ends. Some savings plans also ensure a regular income throughout the duration of the policy or as a part of maturity proceeds. Savings plans essentially help you in reaching your life goals, protect your family in case of any unforeseen circumstances and help create a corpus to pay liabilities in the future. Choosing the right savings plan that offers flexible features and caters to your specific requirement, can be one of the best investment decisions you make. Savings plans are basically traditional life insurance products which can be clubbed with riders that can provide additional benefits in case of unforeseen emergencies. These optional riders include death benefit, critical illness rider, among others. Savings plans can be a great tool to help begin your savings journey with low risk plans that also give insurance cover.
How Long Should You Invest in a Savings Plan? There is no simple answer to this question. The length of your investment depends on your financial objectives. You may have a savings plan to help you build a corpus for a short-term goal, such as buying a car. If this is the case, you may only need to stay invested for a few years. If you’re looking to save up excess funds for your retirement, you might have to invest for a few decades. You must decide your timeline based on your unique financial goals. You can then find a plan that helps you build a corpus for your needs.
Benefits of Savings Plans When you purchase a savings plan, you benefit from: 1. Life Coverage Your savings plan offers a life insurance component. If anything were to happen to you, your family will receive the payout ensuring financial protection during a time of need. 2. Financial Discipline Your savings plan encourages you to put money away regularly. It helps you build a financial habit that will prove useful even later in life. 3. Meeting Financial Goals You can use a savings plan to steadily build up a corpus for your financial goals. With a savings plan, you can save up money to purchase your dream car, take a vacation, and pay for your child’s education and even plan for retirement. 4. Financial Flexibility You can customise your savings plan as per your unique needs and requirements. Depending on the plan you choose, you also have the ability to choose how and where your funds get invested for your future. You can pick funds as per your risk appetite and even makes changes depending on your dynamic financial situation. 5. Save Taxes Savings plans provide life insurance benefits, so they offer tax savings under section 80C of the Income Tax Act, 196113.You can avail a deduction of up to INR 1, 50,000 u/s sections 80C of the Income tax Act, 196113 per year against the money you invest in your savings plan. 6. Guaranteed Returns Depending on the plan you purchase, you will enjoy returns on your investment when the plan matures. Most often, you can opt for payouts at regular intervals while keeping the plan active.
6 Simple Steps to Buy Savings Plan Online Savings plans are life insurance products designed to help you make disciplined and periodic savings and cover your family financially in case of your untimely demise. Today, you can buy a savings plan online without the need for visiting the office of an insurer or agent. All the information about savings plans is available online. You can research for the plans best suited to your requirements, check your eligibility for the same, upload the documents needed and make the payments online. Policies are usually dispatched over e-mail and you can get notifications on your mobile phone as well. Here are some simple steps you need to buy savings plans online Step 1: Assess your financial goals and requirements. Knowing the approximate amount of funds you could need for a big expenditure in future or the funds required to sustain your dependents after you are not around will help you fix an amount that needs to be assured. Step 2: Do your research thoroughly. Most insurers detail out their different savings plans on their websites, complete with inclusions and exclusions. Read the fine print about claim settlements and other terms and conditions before you decide on the savings plan you want to buy. Step 3: Do a due diligence on the insurer you have shortlisted to evaluate the insurer's financial strength, reputation, service quality, reviews and discounts offered. Step 4: Check the eligibility criteria, including the minimum and maximum ages at which you can opt for the policy, income brackets and the various proofs needed to buy a savings plan online. Step 5: Submit the online forms, relevant proofs - including that of address, identity, income, and age. Step 6: Receive the policy documents over email and relevant notifications over your mobile phone. Keep a record of all your investments in a folder so that you can refer to them easily whenever needed in an emergency.
Features of Savings Plans Before you pick a savings plan to safeguard your financial future, let’s look at how they function: 1. Policy Tenure and Entry Age In most cases, you can purchase a savings policy from a very young age. In fact, you can even purchase a policy for your child from the time they are just 90 days. You can select a policy term as per your personal requirements. Some plans offer only long-term savings, while others have short-term options as well. When it comes to savings and investments, the longer you stay invested, the better it is for you and your finances. 2. Guaranteed Returns A savings plan provides low-risk investment opportunities. Over time, you can rest assured of steady returns on your investment. These plans provide a good maturity benefit and steady returns, which allows you to make prudent financial choices in the future. 3. Riders and Life Cover Savings plans offer guaranteed benefits and life cover. When you purchase a plan, you also get life insurance coverage. If you wish to, you can purchase riders that offer enhanced protection. For example, you can purchase an accidental disability rider to ensure you and your family enjoy financial security when you require it most. You can also purchase a rider that provides a payout in case of a critical illness diagnosis during the policy term. 4. Tax Benefits Since savings plans come with a life insurance component, you can enjoy deduction u/s 80C of Income tax Act, 196113 up to INR 1, 50,000 from your taxable income for the premium amount paid. But that’s not all. The maturity benefit you receive from the plan is also exempt u/s 10(10D) of the Income Tax Act, 196114 from taxation, as is the death benefit that your nominee receives. With this in mind, a savings plan allows you to save for the future, while saving on taxes# today.
Factors to Consider Before Investing in a Savings Plan
Before you go ahead and purchase a savings plan, you need to:
Set Your Goals Before you can invest, you need to know why you’re putting money away. Think about your financial goals and what you hope to achieve. Once you know what you’re saving for, you can pick a plan that helps you achieve your goal.
Consider the Risk Depending on where you are in life, you may be okay with risks or might want to keep them at a distance. Think about whether you’re okay to take a few risks with your investment. Remember, plans that offer high returns may come with high risks. Once you understand your risk appetite, you can look for plans that suit your needs. Ideally, look for plans that offer steady returns.
Payment Flexibility Most savings plans provide you with the flexibility to choose your premium frequency. You can choose to pay the premium monthly, quarterly, every six months, or annually. While browsing for plans, check for policies that provide some flexibility as it will make planning your finances easier.
Additional Features Savings plans don’t have to limit themselves to returns and insurance. Search for policies that offer additional benefits like optional riders or free withdrawals. Ideally, look for a name that is trusted in the market. By choosing a brand with a good reputation, you can rest easy knowing that your money is in expert hands.
Charges Most companies that offer saving plans levy a small charge to manage your money. Some companies have a higher fee than others. You should look for a plan that allows you to grow your money without impacting your wallet. Compare plans and charges from various companies before you make a decision.
Documents Required
If you’re ready to purchase a savings plan, ensure you have the following documents:
Policy Form You need to fill up a policy form application. The document provides the company with information about your finances and medical history. Based on your answers, the company will decide on your premium and sum assured.
Income Proof You must showcase your income documents to prove you have the means to pay your premiums. Typically, you will have to share bank statements, previous Income Tax Returns (ITR) and salary slips with the company.
Identity Proof As part of the KYC process, you will need to provide documents that verify your identity and address. You can choose to submit the following documents:
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