The year 2021 had started with much hope and enthusiasm, like any other year. However, everything came to a standstill quickly with the second wave of COVID-19 occurring out of nowhere, followed by the lockdown and an unexpected economic slowdown.
These are the times that actually make you feel proud of the safe investments you made, and which have continued to growth and yield benefits in times like these. If you haven’t already, this is your time to realize the importance of saving plans and make smart investments now!
The best of the savings plan offers much more than just the steady growth of the investment
Tax saving is one of the most important and unique features of these saving plans. The best plans will offer tax saving in all the following situations:
a) Investment amount deductible from taxable income under section 80C
b) Tax-free maturity value/ death benefit
c) Invest any amount without losing the tax-free status of maturity amount
Guaranteed savings plans from life insurance companies offer all the three tax-exemption status to your money. Thus, if you chose to use one of these plans to save for your goal, the goal value could be entirely tax-free.
One factor you will need to keep in mind, though, is that your annual investment in the plan should not exceed 10% of the life cover in the plan.
For example, if you want to accumulate Rs. 50 lakhs, the guaranteed saving plan will accept Rs. 50 lakhs as the base life cover and decide your premium. All you need to do is to make sure that the annual premium in any financial year is not more than Rs. 5 lakhs.
Also, you cannot voluntarily invest more than Rs. 5 lakhs in the plan in any financial year. If you do so, the maturity value of your investment will become taxable.
The best saving plans in the market offer guaranteed returns. Meaning, you know the minimum amount you will get upon maturity at the inception of investment. This makes it very easy to plan for important life goals using these plans.
For example, you want to accumulate Rs. 50 lakhs for your child’s higher education in 20 years. You can invest about Rs. 13,000 per month for the next 10 years, to receive Rs. 50 lakhs in 20 years.
Since the returns are guaranteed, all you need to worry about is completing your investments for the next 10 years. Also, since you also have a similar amount of life cover in the plan, your family will receive the money even in case of your premature demise.
Understand the difference between guaranteed returns and assured returns.
The guaranteed sum is only the minimum assured return. Wealth boosters, as the name suggests, add to your portfolio value over time. These are regular bonuses which add to your plan as long as you stay invested. Longer-term investments naturally accumulate higher bonuses.
Guaranteed Saving Plan and Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance add bonuses to your investment plan, boosting your overall maturity value. The plan offers two bonuses to all investors:
a) Guaranteed yearly additions (annual bonuses)b) Guaranteed loyalty additions (based on policy term, larger bonus for the longer term)
Thus, not only you can be sure to receive the minimum sum at maturity of the plan, chances are you will receive a lot more than the guaranteed sum.
So, as we wanted to accumulate Rs. 50 lakhs in our previous example and we had to invest Rs. 13,000 per month for 10 years. With wealth boosters, your monthly investments will drop to about Rs 5,500 per month.
Goal protection or premium protection is another unique feature of the guaranteed saving plan. This feature means that even if you meet the ultimate fate before completing your investment into the plan, your family will meet the goal.
To understand this unique benefit, consider this example:
In the previous example, we had a goal of funding a child’s higher education with Rs. 50 lakhs in 20 years. To achieve this goal using the guaranteed savings plan you needed to invest Rs. 5,500 per month for the next 10 years.
Now, if you opt for goal protection option, the insurer will cover your premium payments as well as the normal life cover. Without this option, in case of your demise in the 5th policy year, your family would receive Rs. 50 lakhs plus any bonuses and the policy will discontinue.
However, with goal protection option, the insurer will deposit the remaining five years’ premium on your behalf, after paying the death claim of Rs. 50 lakhs. The plan continues even after the death claim and the family will receive the maturity value with all the accumulated bonuses at 20 years’ maturity.
Investment flexibility allows you to invest in a way most convenient for you. For example, if you are salaried, you would like to invest every month, while business professionals may prefer quarterly or annual mode of investment.
Also, you have multiple goals in life, and if possible, you would like to invest in different goals at different times. Limited pay option of the guaranteed saving plan gives you this flexibility of investing in the plan for a limited period.
This is also useful since the plan will accept only a level premium, and as your income grows, you will be better off investing a larger sum every month.
With these many features, selecting the best savings plan should not be a difficult choice. So, start investing and stop worrying about the turbulent times.
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