With so many exciting savings plans available in the market, it is not easy to zero in on a single plan that would be most suitable to you. So how do we decide which is the best saving scheme for us? In this article, we will take you through some of the considerations to keep in mind before purchasing a savings plan.
What is a Savings Plan?
In the insurance business, a savings plan is a type of life insurance which allows you to enjoy benefits of life coverage as well as assists you to save and accumulate funds for your future. When you pay a premium for a savings insurance plan, it earns interest over a period of time which helps you to obtain guaranteed returns or fixed income, based on the plan you choose.
Guide to Choose the Best Savings Plan
1. Set a Savings Goal
What are you saving for? Are you saving for an annual summer holiday, your children’s education, their marriage, or your retirement? Before you choose a savings plan, it is important to have a clear savings goal in your mind.
Having your end goal set will help you choose the right savings plan and keep aside a specific amount every month or year for it. You can also try automating your account to deduct a fixed amount every month from your earnings.
2. Compare Rates Across Various Savings Plans
Savings plans come with various features such as cash benefits, endowment with extended life cover, guaranteed maturity benefits, whole life income benefits and much more. However, these benefits of a savings plan may vary depending upon the insurance provider you choose.
Hence, it would be wise to compare the rates and offerings of savings plans from various insurance companies before choosing the best one for you.
3. Choose the Right Type of Savings Plans
Some savings plans assist you in building a corpus over the years and promise guaranteed returns after the completion of a certain tenure. On the other hand, some savings plans will provide you with regular income. A short-term savings plan helps you achieve short-term financial goals, while a long-term savings plan can help you build a huge corpus and save for your retirement.
If you think you need funds for a specific event in your life (e.g. the marriage of your son/daughter), you can opt for a guaranteed return plan which will provide you with a lump sum amount. Similarly, if you are an individual who is close to his/her retirement age, a savings plan with regular income would be much more suitable for you.
4. Be Wise about Taxes
Over the years, tax-saving investments have become highly popular among regular taxpayers. If you are a taxpayer too, investing in a Savings Plan can be beneficial for you as it guarantees multiple tax benefits.
As per Section 80C of the Income Tax Act, you are eligible to save as much as ₹1.5 lakhs on tax deductions on various insurance policies. Before choosing a savings plan, you can check with the insurance provider if you are eligible for the tax benefit.
5. Do Not Depend on a Single Plan
Last but not least, it would be best if you are not dependent on a single savings plan for your future financial needs. A financial emergency may arise without warning for which it is crucially important for you to have a robust monetary backup.
Ensure that you have sufficient investments in other savings options such as Fixed Deposit, Public Provident Fund or ELSS, etc., too, which can help in case your savings plan falls short and you are in a financial contingency.
To fulfil the financial objective in your life, you need to choose the right savings plan at the earliest. A robust savings plan will prepare you for short-term as well as long-term goals and help you face untoward eventualities.