Since childhood, we have been taught about saving money. But merely saving money and keeping it in your bank account cannot be fruitful. It is important that you invest your savings in a savings plan to reap some real benefits. So, let us first understand what a savings plan is.
A savings plan is a type of investment plan that usually includes life insurance and helps you build a corpus. You can also further invest and multiply your savings throughout the period of investment. With the help of savings plan insurance, you can fulfil your short-term and long-term financial objectives.
Features of a Savings Plan
Now, let us understand the five main features of a savings plan:
- Tenure and Age
The first feature of a regular savings plan is the age and time period of investment. Savings plans come with different age brackets and tenure of investment. Your capacity to take risks depends upon your age. It is generally considered that the earlier you start, the better it is. The reason behind it is the amount of premium increases with your age. If you start investing at an early age, you will have to pay lower premiums and get higher returns.
However, there is another factor that comes into the picture, i.e., the tenure of the plan. If you invest in a plan that has a mid to long-term tenure, you can accumulate a significant amount of money over the period. So, it is better to analyse both features so that your ultimate financial objective is fulfilled.
- Investment Choices
When you buy a saving plan online, you will get a variety of options to invest in. For example, you can invest in financial instruments such as equity if you are a risk-taking individual. Besides, you can also opt for investment in corporate bonds, government securities, etc., if you want to stay on the safer side. Therefore, you should explore all the options available so that you can choose the best one.
- Riders and life coverage
There is an option to add rider benefits, such as coverage against critical illness, accidental death, disability, etc., to your savings plan. It is generally advisable to invest in a single plan with rider benefits rather than taking up two or three different plans. Thus, you can add the riders as per your present and future requirements and opt for a comprehensive plan altogether. For example, Tata AIA insurance provides a comprehensive savings plan wherein you can get coverage against 40 critical illnesses.
- Tax benefits
The tax-saving feature in a plan also acts as one of the savings plan benefits. For example, under Section 80C of the Income Tax Act, 1961, you can get a deduction of up to ₹1.5 lakh on the premium paid. Moreover, if your savings plan provides you with maturity or death benefits, you can also get an exemption under Section 10(10D) of the same Act.
An online money-saving plan includes various charges that you might not be aware of. Therefore, while choosing a saving investment plan, make sure you are aware of all of the charges that come along. For example, fund management charges, administration charges, mortality charges, switching charges, partial withdrawal charges, premium allocation charges, etc. It is obvious that there are some genuine charges but not all. Therefore, a savings plan that has the minimum charges and that provides flexibility is considered to be the ideal one.
There are a few more features that an individual should be aware of in order to choose the best monthly savings plan. A financial advisor or policy provider that you choose matters a lot. Moreover, if you are opting for a savings plan that has a life coverage component, you need to be aware of the company’s credibility in the market, claim settlement ratio, etc.