With the increasing cost of living, investments for a better future have become necessary. The need of the hour is to build a strong financial portfolio comprising a mix of different assets, including equity, mutual funds, bonds, life insurance policies, etc.
Among these, life insurance policy has been growing in popularity. One of the top choices here is a life insurance savings plan. It is a financial tool that combines the benefits of both savings and insurance. It offers a life cover and the opportunity to save for a better tomorrow.
To choose a savings plan, you need to assess your capability and financial goals and then customise the plan as per requirement.
What are Life Insurance Savings Plans?
Life insurance savings plans are another insurance policy category offering death benefits. In addition to death benefits, you also get the opportunity to accumulate savings for future financial objectives.
A savings plan typically works in the same manner as other life insurance policies with additional benefits. For instance, in case of the policyholder’s unfortunate death, the family members are provided with financial security for all expenses, including funeral costs, debts, liabilities, etc., as death benefits.
Additionally, a portion of the overall premium paid towards the plan is used to build up savings. The cash value here grows based on the investments made and is returned to the policyholder after maturity. You can also combine different rider options available with your savings plan to increase the benefits received.
Benefits of Life Insurance Savings Plans
- Financial Security- The prime need today is to prepare yourself for life’s uncertainties by investing in safe financial products. With the help of a life insurance savings plan, you confirm financial stability for your family members even in your absence while accumulating funds for other goals.
You will always have a safety net with a savings plan for food, children’s education, house purchases, loan payments, etc.
- Portfolio Diversification- To enjoy stability, having a diversified portfolio is key. Along with investing in different assets like real estate, equity, and more, when you invest in a savings plan, you can enjoy guaranteed income or returns with many tax benefits, creating ample wealth for your financial portfolio.
- Increased Flexibility- Unlike other assets, with a savings plan, you can decide the premium based on your financial situation. You can also plan the frequency of premium payout depending on your capacity between monthly, quarterly and annual payments. Moreover, you can decide the tenure as needed and customise the savings plan with multiple add-ons.
- Tax Benefits- The premium payouts and death benefit claims have multiple tax benefits. As per the Income Tax Act 1961, under Section 80C, the premium paid for a savings plan can avail of a tax deduction of a maximum of ₹1.5 lakhs annually. This decreases the taxable income and helps save more money.
- Life Cover- A savings plan offers life cover to the policyholder and the savings opportunity to continue saving up for a brighter future while also providing a safety net for the family members in case of their demise. This is helpful as it provides the policyholder with peace of mind.
Conclusion
A life insurance savings plan offers numerous benefits and features that can help individuals meet their financial needs as per their requirements, risk appetite, and financial capacity.
Multiple options of savings plans or available to help you make an informed decision as per the financial goals for the future. There is an option to take a loan against your policy from the insurer in case of fund requirements for an emergency, making a savings plan a good fit for your financial portfolio.
