As far as savings are concerned, the saving accounts have been the most popular mode of saving for the future. They provide convenient places to borrow cash and to keep the money secure. But given the fact that economies are constantly evolving, it can be useful to look for other forms of investment that would not only preserve our money, but also bring extra advantages. One of these is savings insurance plans. These plans bear elements of a regular savings account and also insurance, making these plans a better solution. In this blog, the author is going to discuss the possible benefits of savings insurance plans and why they are more suitable than saving plans.
What Are Savings Insurance Plans?
Savings insurance plans or also referred to as endowment plans are products offered in the financial market which has characteristics of insurance and savings. They offer life coverage as well as an occasion to save money gradually for some time. In the end of the policy term, the policyholder is paid a cash amount which can be useful in many ways like buying a house, funding a child education or any other dream that one might have like retirement.
Advantages of Savings Insurance Plans
1. Financial Protection
Financial security is easily one of the major benefits of savings insurance plans. As opposed to the conventional savings accounts, these plans offer an insurance cover that is for life. In case of the policyholder’s premature death, the nominees are paid the amount equal to the sum assured plus bonuses, if any. This helps in ensuring that your dear ones are well provided for even in case you are not around.
2. Disciplined Savings
Savings insurance plans encourage disciplined savings. By committing to regular premium payments, policyholders build a habit of saving money consistently. This disciplined approach can help individuals accumulate a substantial corpus over time, which can be used to achieve long-term financial goals.
3. Wealth Accumulation
In addition to providing life insurance coverage, savings insurance plans also offer the benefit of wealth accumulation. These plans typically come with bonuses and guaranteed additions that enhance the overall value of the policy. Over the policy term, these bonuses can significantly increase the maturity amount, providing a robust financial cushion.
4. Tax Benefits
Savings insurance plans offer attractive tax benefits under various sections of the Income Tax Act. The premiums paid towards these plans are eligible for tax deductions under Section 80C, while the maturity proceeds are tax-free under Section 10(10D). This dual tax benefit makes savings insurance plans a tax-efficient investment option.
5. Flexibility
Savings insurance plans offer a high degree of flexibility to policyholders. Depending on their financial goals and risk appetite, individuals can choose from various types of endowment plans, such as traditional endowment plans, unit-linked insurance plans (ULIPs), and money-back policies. This flexibility allows policyholders to tailor their investments to meet their specific financial needs.
6. Long-Term Financial Planning
Savings insurance plans are ideal for long-term financial planning. Whether it’s planning for your child’s education, saving for a down payment on a house, or building a retirement corpus, these plans help you accumulate the necessary funds over a defined period. The guaranteed returns and life cover ensure that your financial goals are met even if unforeseen circumstances arise.
7. Loan Facility
Another advantage of savings insurance plans is the loan facility they offer. Policyholders can avail loans against their policy’s surrender value, providing access to funds in times of need without having to liquidate their investments. This feature can be particularly beneficial during financial emergencies.
Comparing Savings Accounts and Savings Insurance Plans
While savings accounts and savings insurance plans both serve the purpose of saving money, there are several key differences between the two:
- Risk Coverage: Savings accounts do not provide any risk coverage, whereas savings insurance plans offer life insurance protection.
- Returns: The returns on savings accounts are generally lower compared to the potential returns from savings insurance plans, which include bonuses and guaranteed additions.
- Tax Benefits: Savings accounts offer limited tax benefits, while savings insurance plans provide tax deductions on premiums and tax-free maturity proceeds.
- Discipline: Savings insurance plans promote disciplined savings through regular premium payments, while savings accounts rely on individual discretion for deposits.
With the current constantly evolving financial world, it may be risky to put all your eggs in one basket and just have a couple of basic savings accounts. Savings insurance plans provide a one stop solution to such a need since they combine the principles of saving, accumulating wealth and covering for life insurance. They give the investors a shield against losses, higher returns on their investments, tax advantages, and the freedom to invest as they wish, and as such they are ideal for long term investment.
With a savings insurance plan, both your monetary objectives are achieved, as well as the security of the future of your loved ones. The current era calls for a shift from the regular savings accounts and consider savings insurance plans to meet the financial security goal and acquire the much-needed financial security. It is crucial to note that the actualization of your financial planning needs you to be proactive and knowledgeable. Therefore, start the journey today and look at an insurance plan that aligns with your desires, and needs.
