Candice Dicki
The Covid-19 pandemic shone a light on the importance of insurance in our lives. However, with a projected inflation rate of 4.5% for 2022–2023, people are still averse to spending on life insurance. If plain life insurance does not appeal to you, you could opt for a savings plan where you get the benefit of life coverage along with the benefits of savings and investment. Saving tax intelligently is one way you can make your money go far and these tax-saving schemes are a way to do that.
You may still be wondering why you should invest in a savings plan when there are other tax-saving schemes available. Read on to find out six reasons why investing in saving schemes is a great idea.
- Life insurance coverage plus pay-outs: Savings plans allow you to kill two birds with one stone by offering coverage plus income benefits. When purchasing these tax-saving schemes, you can choose between endowment or income options. If you want regular income, you can opt for the savings plans that offer such a benefit. So, as with regular insurance, your family will get financial protection in the case of your untimely demise. Some plans even offer life coverage up to the age of 100 years. Plus, you will receive regular pay-outs from the plan for as long as the policy is active. These pay-outs act as additional income, which you can then use to make further investments or save or spend as you like.
- Tax benefits: Savings plans are tax-saving schemes by default as they offer life insurance coverage. Under Section 80C of the Income Tax Act, you get up to Rs 1.5 lakh tax deduction on your premium payment. Moreover, the Maturity Benefit and Death Benefit offered by these plans are also tax-free as per Section 10 (10D) of the Income Tax Act. Therefore, these plans offer great tax benefits for all policyholders. However, tax laws are subject to change from time to time.
- Guaranteed returns: Unlike an investment in direct equities through the stock market or mutual fund plans, these schemes are not subject to volatility. The stock market can go through a bad phase, causing losses for investors. Mutual funds are not immune to the effects of a bad stock market performance, especially high-risk mutual funds. Savings schemes, by contrast, offer guaranteed returns without the risk of loss. All you need to do is choose the plan and the variation that fits your requirement best.
- Meet your life goals efficiently: There are savings schemes geared to meeting important life goals for you and your family. For example, there are child savings plans that combine the dual benefit of child life insurance cover and savings for the child’s future. You can use such a savings plan to save for your child’s higher education. In case of your untimely passing, your child will receive financial protection. In similar ways, other savings schemes help prepare for future goals efficiently.
- Customisation and curation: A savings plan allow you to customise and curate your policy as per your requirements. You can choose from short-term, long-term, or lifelong income options. Or choose from different premium payment terms, either single premium payment, limited premium payment terms, or regular premium payment terms. Evaluate your requirements according to your financial condition and life stage. Then curate the savings plan option that serves you best.
- Inculcate the habit of saving: For most people, saving is not an ingrained habit. Yet saving and investing wisely is crucial for healthy finances and security. A savings plan will go a long way in inculcating the habit of saving in your life.
Savings plans are convenient and hassle-free tax-saving schemes offering myriad benefits, more than just life insurance coverage and tax-saving. Your investment remains risk-free, and your returns are guaranteed.
