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Buying an affordable savings plan with good cover

dateKnowledge Centre Team dateJanuary 18, 2021 views245 Views
Buying an affordable savings plan with good cover

Have you been thinking about saving and securing your future, but are confused about what to do? Most millenials and even those who've been earning for quite some time now face difficulties in choosing an affordable investment option to secure their financial goals. Apart from achieving milestones, your investments and savings should save your family and you from any financial troubles in a grievous emergency. Thankfully, there's a solution that provides you with all this and more.

Understanding the Savings Plan

A Savings plan comes under the class of life insurance plans, and it helps you save periodically, without worrying about your continual expenses. For those who find it hard to budget and ration their expenditures, this is a good option because a guaranteed savings plan ensures steady returns through its term.

Savings plans not only give you regular returns on your investment but also help set money aside for undesired and unexpected future events. When it's you or your loved ones on the line, having a guaranteed savings plan on your side can mean the world. Imagine - just a little bit of system when it comes to your savings, and voila! You can create a large total sum for future requirements.

Different schemes are built, keeping in mind the varying expectations, goals, and budgets of people.

Buying an affordable savings plan with good cover

Choosing a savings plan can seem intimidating for many reasons. One may not have enough financial knowledge to make a sound decision independently, one may not know of all the options available, or one may need some guidance.

Before choosing an affordable savings plan, you must analyse certain factors and choose based on those factors:-

  • Needs - It is a good habit to make a checklist of all your financial goals and needs for now, and the future. Use the particular savings plan calculating feature online to determine the actual value of your savings plan investments in the future. You can also calculate the actual value of your financial goals, keeping inflation in mind. Doing so will help you analyse the deficit between your goals and what the investment plans can offer. To calculate via the calculator, you'll need to know the down-payment you'll initially make, the monthly contribution to your plan, the average annual interest rate, the entire tenure of your chosen investment and other factors like inflation.
  • Life Stage - Understanding what life stage you are at, and what life stage you'll be when the tenure ends - both are equally important. Your current life stage determines your affordability and current financial goals, and your later life stage may determine your financial needs. Planning for the different stages of your life helps you achieve your dreams and keep yourself and your loved ones financially secure.
  • Taking risks - You should keep in mind the risk you are willing to take, and the kind of rewards you are expecting. There should be a balance between the risks and the rewards of a guaranteed savings plan. The Unit-Linked Insurance Plan is a popular choice among those looking for savings, investment opportunities and insurance under one savings plan. A ULIP gives great returns and comes with a good cover. However, whether you choose a ULIP or some other plan, you must analyse your risk appetite. Knowing this can help you figure out where to invest and how.
  • Amount of the cover - An affordable savings plan with a good cover is the best option. Deciding on a life cover requires you to understand your liabilities. You must take into account the number of dependents, your current assets, your future income, your current income, and any ongoing life cover. It is recommended to have a life cover that's at least 10 times your annual income. Doing so shall help you stay on the safe side of your investment.

  • Liquidity - Liquidity is a crucial aspect of any investment or savings opportunity. Even with a guaranteed savings plan, you must consider the liquidity of the plan and whether it meets your expectations and requirements. Check the ceiling for withdrawal from the plan's commencement date, whether you plan on making partial withdrawals, how the liquid is the plan for emergencies and so on. In the case of a dire situation, liquidity could mean the difference between being safe and unsafe. Ensure that whichever savings plan you choose has adequate liquidity.
  • Consider all options - There are a bunch of savings and investment options out there. The key to making a sound financial decision is knowing your options and what works best for you. Diversity in your savings or investment product can help save you from a fluctuating environment and reduce the risk associated with that investment product.
  • Performance - Your work doesn't stop after picking a savings plan. Please keep coming back to your portfolio, and review it regularly. Needs may change with life stages, or unprecedented requirements may arise. Keep reviewing and making changes whenever necessary to stay updated and on top of things. Instead, you can even maximise the benefits of a guaranteed savings plan by making the right changes at the right time.
  • Ask questions - Grasping financial information can be tricky for many people. Don't be afraid to keep asking questions till you know everything you wish to know, and comprehend it fully. Make as many queries as required before choosing a plan, and make updated queries when you review your portfolio. Ensure that you ask about the terms and conditions associated with your savings plan. Only make a down-payment when you're a 100 % sure that this is what you want.

  • Terms duration: Choosing a longer term for your plan may mean that your invested amount grows via compounding. You might avail greater returns and benefits. Understanding the term duration is another aspect of choosing a savings plan.

  • Servicing- Choosing a savings plan is only the first step towards a safe and secure financial life. What happens when you need help, or you need to avail services? Pick a company that offers prompt servicing, and has several touchpoints and branches to approach. If they offer services through digital platforms as well, that should be an advantage.

Benefits of a guaranteed savings plan with a good cover

"A penny saved is a penny earned", and a savings plan with a good cover is undoubtedly a step towards a worry-free and hassle-free future. Indians are known to maintain a reasonable savings rate, with more and more households becoming aware of the benefits of a guaranteed savings plan.

Some of these benefits include:-

  • Coverage and Payouts - A savings plan offers you the opportunity to cover your family if the need arises financially. Apart from receiving steady payouts as part of a savings plan, the coverage offered is also a much-needed benefit.
  • Works for everybody - Even if you aren't a wiz at managing your finances, or diversifying your investments, a guaranteed savings plan saves you from doing the work yourself. You can rely on a good savings plan to secure your investment opportunities.
  • Discipline and order - Saving is not an easy task. It requires discipline, commitment and future planning. Not only do you have to be mindful of your expenses, but also considerate of your future needs. Having a savings plan means some money is set-aside regularly. It brings discipline and order in your life when it comes to savings.
  • Tax benefits - Saving plans come with tax benefits, just like other insurance plans.
  • An abundance of choices - There is an abundance of choices in India when it comes to saving plans. You can pick the one that is tailored for your requirements.
  • Helps achieve goals - Saving plans can have a specific target or purpose. They could be for a specific goal in your life or a big event, such as going to a prestigious college.
  • Flexible options - Banks and companies understand that we, as individuals, vary on many accounts. Our aspirations, requirements, capabilities and shortcomings are different. Our dreams and goals may vary from each other, so may our fears and risk-appetites. That's why saving plans often come with a wide array of features that are often customisable.

A good savings plan combines the discipline of savings and the safety of insurance. India has a wide variety of options to choose from, with different prices and rates. Despite wanting to choose the cheapest one, make sure to rethink your choice.

Sometimes the cheapest one might not be the best option. That's why you should pick an affordable savings plan, with diversity, and adequate liquidity. Making the right investment and choosing the right savings plan can give a head start to a safe life for you, with ample opportunities fulfilling your financial goals. Whether it be buying a house, saving for your marriage or your next car, no significant expenditure is successful without proper planning.

Even when choosing a savings plan, do some market research and consult the right people and say hello to a financially stable life!

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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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