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What are the Best Saving Plans in 2021?

dateKnowledge Centre Team dateMay 18, 2021 views157 Views
What are the Best Saving Plans in 2021?

Whether you are looking to buy the best saving plan for your new born baby, or you want to leave a legacy for your grandchildren, putting away money in a saving and investment plan is a great way of boosting your wealth. A lot of experts may also recommend you to diversify your investment portfolio. Remember that a balanced investment portfolio must contain a mix of equities, government and corporate bonds, property and cash, saving plans that assure returns.

When searching for a saving plan, we tend to find the best one as per our financial requirements. We consider plans the best when we get sky-high returns as quickly as possible without losing the capital investment. However, when it comes to “High-return and Low risk” saving and investment product, you are not likely to find any such product to invest in. So, rather than considering the best saving plan to be an investment option that gives high return with no risk, you must start searching for plans that guarantees returns.

You may find saving plans that have high risk but they can generate higher inflation-adjusted returns in the long term. To help you find the best saving plan for your investment needs in 2021, we have created this all-inclusive guide. Let us first understand, why do you need to save and invest?

Objectives of Saving and Investment

We generally look forward to buy the best saving plan or any other form of investment in the hope of growing our capital. As an investor, you may want plans that help in generating income to support your financial needs. While some other investors may need a saving plan that helps them in building a retirement corpus for a happy and carefree retirement. The main reason people decide to invest their money may vary according to their personal and financial goals and aspirations. However, the most common objectives when it comes to investments are:

1. Safety

One of the most fundamental reasons for investing money is to preserve capital. Some of the best saving and investment instruments act as a way to park funds and keep them safe. These include government bonds and fixed deposits; the returns may be lower here, but so is the risk.

2. Growth

A lot of investors also put their money to grow while aiming to earn more through it. This is achieved through investment options like mutual funds and commodities. The initial amount to be paid and the associated risk are higher with these options, but so are the returns.

3. Stability

Sometimes, investments are also made to ensure a permanent or long-term source of steady income. For example, you may consider investing in the stocks of a company that pays regular dividends to its investors.

4. Tax Benefits

The Income Tax Act of 1961 offers some tax benefits wherein deductions are made from the payable taxes when investments are made in Public Provident Fund (PPF), Equity Linked Services Scheme and also with savings cum insurance plans.

5. Future Planning

Generally, people prefer investing a part of their money during their active working years towards a retirement scheme or fund. So that once their working years are over, they can continue to be self-reliant. There are some saving plans that work best to build a retirement corpus by generating an additional stream of income.

6. Short-term Financial Goals

Sometimes, people have short-term financial goals that may include buying a car or the downpayment of a home loan. To achieve these goals, people invest in short-term plans or acquire commodities that have a higher chance of value increment resulting in the generation of considerable returns in the short-term. For example, people invest money to buy precious metals like gold and silver.

As now we are clear of the objectives that may lead one to search for the best saving and investment plan, let us understand the types of saving and investment options that are available.

Types of Saving & Investment Options

There are numerous ways in which you can invest your money. One way is through the diversifying your portfolio of assets. It may include investment in precious metals like gold and silver; buying stock in companies, which may or may not pay dividends to their investors; and realty, as land is considered an asset in India.

Learn how to adjust your investment portfolio for post COVID world.

Another way is through set saving plans that are specifically designed to help you as an investor in achieving your desired return value to the extent that it is possible within the bounds of your predetermined risk appetite and spending capacity.

There are two kinds of investment plans: Short-term and Long-term investment plans.

Short-term Investment Plans

These investment options are highly liquid. You can invest your funds for a shorter duration of time. This can be anywhere between 3 months to 3 years. The most common purpose for choosing short-term saving and investment plans are safety of funds and generation of wealth for short-term financial goals.

Some of the best short-term investment plans that can be used for savings are listed below:

1. Debt Mutual Funds

The safest form of mutual and debt funds is investments in debt and money market securities. The risk involved is low, and returns can go up to 10%, making it the ideal option for short-term investment. The tenure of a Debt Mutual Fund investment can be from 90 days to 3 years and can be categorized based on this period into Ultra Short Duration Funds (3 to 6 months), Low Duration Funds (6 to 12 months), and Liquid Funds (up to 91 days).

2. Treasury Securities

A Treasury Bill is a security backed by the government which offers high liquidity. The risk is low, and returns are decent. The tenure of Treasury Securities can be from 91 days to 10 years. However, the amount received as returns will be in proportion with the tenure.

3. National Savings Certificate (NSC)

NSC is a government-backed, tax-saving, short-term scheme that can be purchased from any post office. Tax benefits can be availed for an NSC under Section 80C of the Income Tax Act. If you are planning to buy the best saving plan, you must consider and compare all the available options.

4. Large Cap Mutual Funds

These are low-risk instruments that invest your money per market capitalization. Your money is invested in Large Cap companies for tenure of 3 to 5 years. As these companies function on well-established business plans and strong financial backing, the chances of optimal returns are high, and risks are very low. Therefore, Large Cap Mutual Funds is one of the best short-term saving plans.

5. Recurring Deposits

The investors, in a recurring deposit, can make payments in the form of monthly instalments, contrary to fixed deposits wherein the lump sum is invested. This is another best low-risk option for short-term saving and investment.

6. Post-Office Time Deposits

Post-Office Time Deposits (POTD) is an investment scheme by Indian Post. It is a popular short-term scheme in rural and remote areas, and its tenure can be chosen from options of one year, two years, three years, and five years. It is similar to a Bank Fixed Deposit in many ways.

7. Bank Fixed Deposits

Fixed deposits are also considered to be a form of investment, wherein you deposit a fixed amount with a bank for a fixed amount of time and in return get a set percentage of that amount as interest. Although the returns in this are quite low, so is the risk. The tenure for a fixed deposit with a bank can be from 7 days to 10 years, and the interest rates vary from 3 to 8%.

Long-term Investment Plans

Long-term Investment Plans allow you to invest your funds for a longer period. The risk factors for long term investment plans are usually higher than short-term investment plans, but so are the potential returns. However, these risks can be minimized by conducting proper research before investing. The major long-term plans include:

1. Unit Linked Insurance Plans (ULIPs)

A ULIP is an integrated plan which gives you the benefits of both investment and insurance plans. You can pay the premium on a monthly or annual basis. This is an ideal option for an investor who is looking for a secure earning plan for long-term. When you pay the yearly premium in favour of ULIP, a part of this premium is used to provide the insurance cover while the other is used as an investment to the fund of your choosing. You can choose from Equity, Debt, or Hybrid funds. ULIPs are considered to be one of the best saving plans that offer life cover with an option to grow your wealth.

Learn about these 5 reasons you should invest in ULIPs.

2. National Pension Scheme (NPS)

A government-backed scheme which is open to all individuals belonging to the age group of 18-60 years, however, an extension to 70 is possible for the maximum age. This scheme allows you to invest in different instruments like debt and equity and the final pension amount you get is the returns from these investments. You also have the option of partially withdrawing funds from your account in case of emergencies.

3. Public Provident Fund (PPF)

A great option for investors as it offers tax benefits and steady interest at low risk. PPF is a post office savings scheme, where the returns received by you are given tax exemptions. The tenure for PPF is a minimum of 15 years which can be later extended five years at a time, and partial withdrawals can be made after the initial five years of the plan’s commencement. The minimum investment in a PPF account in a financial year is 1-5 lakhs.

4. Equity Linked Savings Scheme (ELSS)

Considered the best Equity Mutual Funds long-term investment plan is ELSS as these investments when under 1.5 lakhs are eligible for tax exemption under Section 80C. It is the only mutual fund scheme that qualifies for tax-benefits. High returns can be expected from this scheme in the long-term, although the risks involved are comparatively higher than alternative schemes and instruments. There is a strict lock-in period of 36-months, which applies to every deposit in a particular account. Hence, you cannot make a withdrawal under any circumstances until the lock-in period is over.

5. Guaranteed Savings Schemes

Considered by many a more secure alternative to ULIP, Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Saving Plans offer fixed and guaranteed returns with low risk. The period for the maturity of these schemes varies from 10 to 20 years. You can also claim tax benefits for investments in Guaranteed Saving Plans under Section 80C. Saving plans that offer guaranteed returns are often considered to be the best by investors.



How to Invest in Saving and Investment Plans?

Who doesn’t want their money to grow! But making smart investments is far more important than the amount of money you might invest. The main things to consider before investing are:

  • The tenure of the investment and the time it will take your investment to generate returns along with your needs.
  • Your financial goals and to what extent the investment you are opting for can fulfil them.
  • The risks that you’re willing to take and can recover from.
  • Tax-benefits associated with the saving plan that you are choosing to invest in.

It is also important to conduct your research and educate yourself about the best saving and investment plans and consult with expert financial advisors. At Canara HSBC Oriental Bank of Commerce Life Insurance, we are ever-present to help you plan your future.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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