Financial planning has always been a fundamental skill for a good life, but it has become a necessity in this rapidly changing world. Tech is evolving at an unprecedented rate and countless crises are arising everywhere.
If your personal life is not in order, dealing with the issues of our times is simply out of the question. This puts you in an incredibly vulnerable position. Ultimately, only you can decide the best strategy for personal wealth and security for yourself.
While there are many roads to financial freedom, some are far better for the majority than others. A Savings/Investment Insurance plan is one of them. Let’s take a closer look.
What is a Savings Insurance Plan?
A savings insurance plan, also called an “Investment Insurance Plan,” combines the benefits of savings and insurance. This dual-feature plan not only provides life insurance coverage but also contributes to building a savings corpus over time.
It offers you a safety net through life coverage, while also encouraging the habit of saving regularly. Hence it serves a dual purpose in your financial portfolio.
Features of a Savings Insurance Plan
- Life Coverage: At its core, it provides life insurance coverage, ensuring financial protection for your loved ones in the event of your untimely demise.
- Savings Component: A portion of the premiums you pay goes towards building a savings pot, which matures over a specified period.
- Guaranteed Returns: Many plans offer guaranteed returns or bonuses, making them an attractive option for conservative investors.
- Loan Facility: Some savings insurance plans allow you to take a loan against the policy, providing financial flexibility when needed.
- Tax Benefits: Premiums paid and benefits received (subject to certain conditions) are often eligible for tax deductions and exemptions under prevailing tax laws.
Savings Insurance Plan: A Worthy Investment?
Worrying about your health and your loved ones in case of unforeseen tragedies is common when you’re investing for the future. When you’re looking ahead, it’s not only normal to see the worst-case scenario, it’s actually wise.
An investment insurance plan takes care of both these problems on autopilot. But is it the right choice for you? Let’s weigh the pros and cons.
Pros:
- Safety and Security: The life insurance component provides peace of mind, knowing your loved ones will be financially protected.
- Forced Savings: Saving requires discipline and is often difficult. The compulsory premium payments ensure that you’re building your wealth.
- Guaranteed Fixed Returns: The best thing about these plans is the guaranteed returns. Savings/Investment Plans are NOT subject to market risks.
- Tax Benefits: The tax advantages are the cherry on top, making it a tax-efficient investment option. The premiums you pay are deductible from your income tax as per section 80(D) of the Income Tax Act.
Cons:
- Lower Returns Compared to Other Investments: While safer, the returns on savings insurance plans are often lower than what you could potentially earn from other investment avenues like stocks or mutual funds.
- Long-term Commitment: These plans usually require a long-term commitment, and early withdrawal can lead to penalties or lower returns.
- Cost: The cost of monthly premiums can be difficult for people on a tight budget, and if you miss too many, your benefits may suffer.
Savings/Investment Insurance Plan: Is It Worth It?
The viability of a savings insurance plan depends on your exact circumstances. Here are a few indicators that a savings insurance plan might be right for you:
- You’re Seeking Financial Freedom: If you often feel limited by financial constraints despite an income, then savings are very important for you. If saving regularly is a challenge, the structured payment schedule of a savings insurance plan has proven to help instill financial discipline.
- Looking for a Safe Investment Avenue: Most people are not experts and should take a ‘slow and steady’ approach to wealth accumulation. Investment insurance plans offer guaranteed returns.
- Need for Insurance Coverage: If you’re in the market for life insurance and also want to save, combining the two in one plan could be convenient.
If you are a working professional who’s earning on a salary basis, you might not have the time or energy to invest in high-risk options. In such a case, savings insurance plans offer you great value in the form of peace of mind.
What’s more, guaranteed profits and life insurance also serve as a safety net for riskier investments in the future.
Tips for Choosing the Right Savings Insurance Plan
- Consider Your Situation: Understand the stage you’re at in life, your income, and your long-term financial goals.
- Utilize Digi Bima: Never settle for the first plan you see on a single Google search. Digi Bima will pick the best options for you after a quick consultation.
- Read all the policies: Pay attention to the terms and conditions, including surrender charges, policy terms, and the fine print on guaranteed returns. Each insurance provider has its own terms and conditions.
Conclusion
A savings insurance plan can be a valuable addition to your portfolio. It provides the combined benefits of life insurance coverage, saving money, and investment that builds lasting wealth.
Whether you are an avid investor, or just starting out, it can be a great way to get a valuable safety net that brings you peace of mind.
A diversified portfolio is best, and these plans have the added benefit of being your golden parachute if the worst comes to pass.
