FAQ Long Term Savings Plans
A Long Term savings plan is akin to a life insurance policy that does much more than merely offer you a protective life cover. It can help your money grow, since it is essentially a financial scheme that combines the benefits of a life insurance policy
and an investment. The terms and benefits vary from one savings plan to another. Generally, however, savings plans can offer you advantages like a steady stream of income, a lump sum payout after a specific number of years, or additional riders over and above the life cover.
Before you get started with a savings plan, you need to ensure that you choose the right option. Your savings plan needs to align with your financial goals. So, take a look at the various different kinds of plans offered by financial institutions and understand the benefits offered by each scheme. Some may promise guaranteed additions, others may offer riders that help you meet the financial obligations that come with critical illnesses, and yet others may give you the option to enjoy additional bonuses right from the first year of the policy. Pick the ones that fit in with your financial goals, so you can earn benefits that help you achieve your long-term and short-term objectives.
Once you’ve identified the right savings plan for you, check the eligibility conditions and ensure that you qualify for the plan. If you do, you can invest in the plan through the service provider’s online portal, or directly head to the financial institution’s branch office and purchase the plan offline. Another way to get started with a savings plan is to invest in one through an agent employed by the insurer.
An endowment plan
is a kind of savings plan that combines insurance and investment. It allows you to save for the future while simultaneously offering you a protective life cover. In exchange for premium paid on a regular basis, an endowment plan offers a guaranteed sum assured in case of the policyholder’s demise. If the insured survives the policy term, maturity benefits are generally paid out to the policyholder. Additionally, an endowment plan also allows you to add on a rider for financial support in case of an accident or diagnosis of a critical illness.
So, should you buy an endowment plan? The answer is an unequivocal yes. This is particularly true if you want to receive a lump sum monetary benefit around the time you retire.
A money back savings plan is a kind of scheme where the insured receives a percentage of the sum assured at regular intervals. Payouts can be monthly, semi-annual, or annual. The advantage of a money back plan is that it gives you a steady stream of income to fall back on throughout the term of the policy, while also offering you a protective cover and a sum assured at the end of the policy’s term.
You need a savings investment plan because it helps you invest your money in a disciplined manner. In addition to this, a savings investment plan also gives you a host of advantages in return for regular premium payments. The benefits range from a lump sum payment at the end of the policy’s term to regular monthly payments. It also includes tax benefits, since a savings investment plan is also a tax saving option.
By choosing the right savings investment plan, you can achieve your financial goals faster. It’s also a smart way to secure your future, because a savings investment plan offers you a protective cover in the event of death, accidents, or critical illness, depending on the riders you opt for.
Depending on the kind of benefits they offer, there are various types of savings plans. Some of the most commonly preferred policies include endowment plans, guaranteed income policies
, super saver plans, income protection plans, and money back plans. There are also specific savings plans that help pay for your child’s education, such as the College plan, and schemes like the Smart Child Plan that helps you secure your child’s future financially.
When you purchase an investment plan, you’re required to make regular premium payments to the service provider. These premiums may be monthly, quarterly, semi-annual, or annual payments. Irrespective of the schedule of payment, the premiums paid for purchasing a savings plan can offer you tax benefits.
According to section 80C of the Income Tax Act, 1961, the premiums paid for investing in a savings plan during a financial year can be claimed as a deduction from the total taxable income for that year, up to an upper limit of Rs. 1.5 lakhs . This, in turn, reduces the amount of tax you’ll need to pay, thereby bringing your tax liability down.