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Want to Give A Perfect Start To 2021? Consider These 4 Savings Plans

dateKnowledge Centre Team dateDecember 05, 2020 views87 Views
Want to Give A Perfect Start To 2021? Consider These 4 Savings Plans

This gives a chance to your home-grown “family” experts to hold court more effectively. Towards the end of the year one topic of conversation definitely veers towards tax, savings and insurance. Many points of view emerge, and you might get lost in the various options being discussed.

One reason contributing to the confusion is that many know their favourite option very well and not as much the others. So, if you follow the financial advices of your friends and family your portfolio will be more suitable to cater their needs rather than yours.

Thus, make sure to identify and acknowledge your financial needs before selecting the investments. Here are four best options for you to consider based on your financial goals.

These four options can cater to either multiple goals or very specific goals for you:

1. Guaranteed Savings Plans

Guaranteed savings plans are, as the name suggests, plans with guaranteed maturity values. You can estimate the maturity value of the plan right at the beginning of your investment. These saving plans are best option for long-term but very important goals, where you need a specific sum of money.

Since life insurers provide guaranteed savings plans, you can expect the plan to have following features and benefits as well:

  • Life insurance cover
  • Tax benefits under section 80C and 10(10D)

Apart from these benefits, the best guaranteed savings plans also offer the guarantee of achieving your goal. For example, Guaranteed savings plan from Canara HSBC OBC life insurance has the goal protection option. This option allows your family to:

  • Receive the life cover sum assured immediate upon your untimely demise
  • Receive the intended maturity value from the plan as if you were always there with them

Goal protection option ensures that your investment continues even after your demise, and your family receives the maturity value you intended. This savings plan can be your best option for saving towards marriage and higher education goals of your children.

2. Unit Linked Insurance Plans (ULIPs)

ULIPs are one of the most flexible and useful investment options of modern times. If you are the kind of person who is always setting aggressive goals and goes all in to reach the gaols, this option may just be the right one. You have the freedom to choose whether you want to invest in equity or debt or balanced liquid funds.

You also have the option of managing your asset allocation yourself or choose an automatic strategy to work for you. If you want to achieve large long-term financial goals, automation is the best way forward. Automated strategies will keep your portfolio safe from sentimental errors we as humans are often prone to.

Apart from the investment strategies and automation, the best ULIP plans such as Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance also offer the following:

  • Goal protection option, where investment continues even after your early demise
  • Bonus additions for long-term investors

The best advantage of ULIP investment is that you get the tax benefit regardless of which asset you are investing. Also, going forward, all your partial withdrawals are tax-free after the lock-in period of five years. So, you can also think of using ULIPs as your post retirement income option.

3. New or National Pension Scheme (NPS)

National Pension Scheme (NPS) is a government-sponsored pension scheme. Though initially launched for government employees only, now it is open to all Indian citizens between the age of 18 and 60.

If you want a perfect retirement savings solution NPS is second only to a ULIP plan in investments and tops the tax benefit scale. If you use NPS Tier-1 account for your retirement savings you have the following benefits:

  • You can redirect your employer’s retirement contributions to NPS
  • Full portability means your NPS account number is with you for lifetime, regardless of how many times you change the employer or employment
  • Claim additional tax deduction of up to Rs. 50,000 under section 80CCD (1B)
  • Enjoy automatic portfolio management based on your age (highest equity allocation of 50% which gradually reduces to 0% at retirement)

There are two main categories in the NPS: Tier I and Tier II. Everyone who joins the NPS comes under Tier I and Tier II has different options. Many options available from banks and financial institutions for NPS accounts for retirement and additional tax savings.

Even if you do not need the tax benefits you can still enjoy growth of your investment with Tier-2 accounts.

4. A Whole Life Term Plan

A whole life term plan is a term insurance policy that can continue to cover your life up to 99 years of age. Whole life term plan is one of the best long-term plans to offer financial estate to your next generation. This plan allows you to automatically convert your normal term insurance cover into an estate if you survive beyond 60.

While you have the option of paying premiums throughout the entire life, you can opt for premiums to be paid only till retirement, i.e., 60 years of age. Your life cover, however, will continue till you are 99 years old or your natural death.

This option has all the tax benefits available to a term life plan under section 80C and 10(10D).

The above four options can cater to – your long-term life goals, wealth accumulation goal retirement goal and estate transfer goal. All four option allow you to invest as per your risk appetite and fund needs in future.

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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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