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7 Reasons to Buy a Savings Plan

dateKnowledge Centre Team dateDecember 30, 2020 views79 Views
7 Reasons to Buy a Savings Plan

The phrase "A Penny Saved Is A Penny Earned." is extremely appropriate in this contemporary world. The importance of saving your hard-earned money cannot be understated. Saving money is undoubtedly one of the best financial practices any individual can adopt. According to a statistic by Firstpost, India has the highest income disproportion among prime global economies, especially in a country like India. It’s high time, people need to change.

In today's day and age, everyone wants to live an extravagant life, and there's no problem with that. However, people need to understand that saving money does come with sacrificing a luxurious life; all you need to do is spend on the things you really "need." You can still have the life you want with some extra cash for backup and security with a life insurance plan.

Why do you need to save money?

It may seem obvious, but people don't practice the obvious. Most of the time, we think of money as something that should be saved for the future and rightly so. Besides just investing it in the future, money's value plays a larger role in reflecting our ethics and judgements. Below are a few more reasons why one must be conscious about saving instead of focusing on spending:

1. It will aid you in the event of a financial emergency.

Money is power, and we all know that considering we live in a capitalist economy. In your worst financial crises, your savings can help you pay for a large hospital bill, help you avoid debt or leave a financial legacy even after you've lost the majority of your income. Saving can reduce a lot of financial stress during emergencies. Saving helps you in all kinds of financial distress, and most distress is bestowed upon us without any notice. The best example is the current-sinking economy where savings have ensured that the school fees are paid and that the household continues to function despite a job loss.

2. Wings to pursue your dreams

"Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver". –Ayn Rand. This phrase says it all. Money can take you wherever you wish; it is one of the essential tools that you need to fulfill your dreams. To learn something new, to start something new, for everything you need the money and your savings can complement in these areas of your life making you financially stable enough to go for whatever you want in life.

All good ideas and innovation require some seed funding. Occasionally you may not get this funding from investors and to get your entrepreneurial venture off the ground, your saving can be ideal.

3. Long term Security

In a country like India, where people prioritize security above everything, everyone needs to start saving money if they want to be secure in the future.

As stated earlier, your financial emergency, your medical emergency, your life after retirement, everything will get covered with a simple practice of saving money. All your hard-earned money will form the backbone of your future and provide long-term security in the real sense. Furthermore, unless you are in a government job, your salary or job itself is never stable. In a hire and fire economy, you could lose your job at any point in time. If not that, then your salary is determined by rising and falling market forces, therefore affecting a possible retirement plan or allowing for you to have stable enough income to save for long term security.

4. Saving for Fun

As stated, you don't have to sacrifice your dream luxe life for the sake of saving money and security. These savings will compliment you on enjoying your life to the fullest, without any financial stress. Saving money has never been a practice to hamper your joy. It's critical to balance your financial savings and physical well-being. It would be best if you keep some savings aside for a holiday you might want to take when you retire.

How to save money?

Saving money is never as simple as just cutting back on expenses. It goes much beyond that, depending on what your priorities are. An excellent way to start saving is by assessing the status quo and understanding how you are spending in the first place. Redistribute your funds by making a list of your priorities- at the same time, ensure you budget each of these expenditures. For example, if your salary is 50,000 a month, keep aside 8,000 every month as savings. Put it into an FD or a long term investment plan. The rest of the money should be redistributed to meet your living expenses.

In the long run, the best way to save is by investing your savings in investment plans. If you keep your savings at home, it won't grow and will be a static flow. However, if you keep your savings in a savings bank account, you may earn an interest rate ranging from 4-6% per annum. You can earn even higher benefits by entirely investing your money in a savings plan.

What are savings plans? Why should you have one?

Savings plans are life insurance plans that offer individuals an opportunity to save, invest, and accumulate funds for their future. These saving plans help individuals invest systematically and disciplined, creating regular saving habits for policyholders, bringing significant returns.

You can have a saving plan with flexible features according to your needs and requirements. This type of plan often proves to be among the best plans in India.

There are multiple reasons why you should consider buying a saving plan:

1. Coverage

As a life insurance product, a savings plan offers coverage that safeguards your loved ones. A saving plan will provide financial coverage to your family after your demise. This way, you can secure your family even after you depart, as you would have a financial legacy for them to survive the emergency.

2. Flexibility

As mentioned before, you can tailor your savings plan as per your requirements and future goals, right from selecting the funds according to your objectives to increasing your premium while paying the terms.

Everyone is different and has different goals, objectives. So when you choose a typical investment, you must consider the flexible nature of a savings plan and choose a customized plan based on an individual's future objectives and risk appetite.

3. Liquidity

Irrespective of your premium paying term or policy is, after the lock-in period of five years, one can entirely or partially withdraw funds from their account in case of urgency.

4. Systematic Savings

People know the benefit of saving money still they lack the practice and knowledge on saving their hard-earned. A savings plan encourages the individual to form a habit, more appropriate a habit of systematic and disciplined saving. One of the most important benefits of a savings plan apart from the significant returns is it teaches the disciplinary habit of saving within a person.

5. Wealth Growth

A saving plan not only saves your money but helps it to grow at a rapid pace by investing your money in market linked-funds.

6. Helps Save Taxes

Since saving plans are a form of life insurance plans, they offer the likewise tax benefits offered by additional insurance plans. In particular, you can avail of a release of up to Rs 1.5 lakh towards your premium payments, as per Section 80C of the Income Tax Act.

The maturity sum received is also excluded subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

7. Helps you meet your objectives efficiently.

Saving plans customized to fulfil your future goals and objectives in the most efficient way possible. For example, specific saving plans are designed as investment plans to aid you to save up and meet the determined educational goals you may have set for your kids.

How to choose the right saving plan?

You must choose the right kind of saving plan to suit your needs and objectives to fulfil your future goals. To choose the accurate saving plan for yourself, you must first set your goals and investment plans. Figure out your short-term and long-term goals that you want to fulfil from investing in a savings plan.

After that, you will need to finalize the investment mark and the degree of risk you want to take. Before heading out for different savings plans, you need to be clear in your head about what you want and how you want, and figure out the amount of calculated risk you are willing to take.

It would then help if you researched different saving plans - their flexibility, unique features, terms, conditions, interest rates, etc. Finally, choose the best plans accordingly, enjoy the returns, and fulfil your dreams.

It is never too late to invest in a saving plan and get started on your journey towards attaining critical life goals and fulfilling your dreams. For that, you need a reliable and profitable saving plan such as the Invest 4G Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. Canara HSBC Oriental Bank of Commerce Life Insurance is one of the most flexible, trusted, and advanced saving plans that you can invest in India.

This ULIP plan provides a wide variety of choices from seven different funds and four portfolio strategies. Moreover, you can enjoy special features such as loyalty additions, wealth boosters, as well as the return of mortality charges on maturity. What else do you need?

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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