Life is full of eventualities. One must do proper financial planning to live a tension-free life. Investing from a young age is the best thing to do. For a financially secured future, invest in a savings plan of your choice. You can avail tax benefits and create a satisfactory financial cushion. However, it is necessary to know what entails a good savings plan.
What is a Savings Plan?
A savings plan is a life insurance plan that offers various opportunities to an individual for wealth accumulation. These plans help in multiplying money ina disciplined and systematic manner. A good future savings plan acts as a support in achieving long-term financial goals. Apart from wealth creation, these have the benefit of insurance coverage.
A death benefit is paid under the savings plan to the nominated beneficiary in the event of the insured’s demise during the policy’s term. The Indian government introduced savings plans along with public sector banks and financial institutions. Due to the government’s backing, savings plans offer complete safety of capital. Future savings plans are financial instruments with low risk and suitable returns.
Factors To Consider Before Investing In A Savings Plan
There are few determinants of future savings plans that one needs to be aware of before buying one.
Tenure of Investment
The common investment horizon in insurance plans is mid to long term. Usually, ULIPs are a great way to build a huge corpus over the policy’s term. An individual can start with a low premium amount and then increase it over the life of the policy. In savings plans, insurance companies offer the option to increase or decrease the premium amount as per the convenience of an individual.
Before making any financial investment, it is crucial to know your risk profile. Age is an important factor that determines how much risk a person can take. People in the younger age group, such as the 20s, can take higher risks and reap lucrative returns. They can opt for aggressive investment plans such as ULIP. It can help them in investing more money in equity rather than debt.
An individual should be clear about the reason for investing in a specific savings plan. Long-term goals can range from building a significant corpus for retirement to planning your child’s higher education. The final goal also helps in selecting an investment option with tax-saving options. Hence, buy a future savings plan that is in line with your future planning.
There is no standard savings plan with set features that are best for all individuals. Certain plans allow partial withdrawals by retaining a few benefits while surrendering a specific portion of the policy. A few investments have fixed cover, such as ten years and while others provide coverage for the entire life. Hence, a person can enjoy flexibility with comprehensive coverage options.
A future savings plan is one of the best financial instruments for future financial security. An individual can choose a plan as per his preferences, age, and needs. So, be thorough while searching for a savings plan keeping in mind the above factors.