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5 Tips to Choose an Insurance cum Savings Plan

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5 Tips to Choose an Insurance cum Savings Plan

By : Bajaj Allianz Life

Many individuals view life insurance plans only as a form of financial protection for their family. While that is true, a life insurance plan can offer more than just protection. Intriguing, isn’t it? Continue reading to find out how to invest money through a savings plan.


What is an insurance cum savings plan?


A savings plan is basically a type of a life insurance that combines the elements of insurance and savings. The insurance component of the plan offers you a life cover that allows you to protect your family from the uncertainty of life. On the other hand, the savings component of the plan invests your premium contributions in various instruments to provide you with the ability to create wealth.

A major advantage of a savings plan is that it is one of the many tax saving investments out there. The premiums that you pay towards a savings plan can be claimed as deductions to the tune of Rs. 1.5 lakhs in a financial year as per section 80C of the Income Tax Act, 1961.

This helps you bring your overall tax liability down. That’s not all. Both the death benefit and the maturity benefit of a savings plan are also exempt from tax under section 10(10D) of the Income Tax Act 1961. The above deductions and exemptions are subject to the provisions contained in the Income Tax Act, 1961.

There are primarily two different types of savings plans out there - participating savings plans and non-participating savings plans. A participating savings plan offers you bonuses, as may be declared by the insurer, over and above your basic sum assured, which can enhance your overall payout. A non-participating savings plan offers guaranteed returns with no bonuses applicable.


5 tips to choose an insurance cum savings plan


Now that you know all about savings plans, let’s take a quick look at a few tips that you can use when choosing one.


1. Determine your investment objective


Before you choose a savings plan, always ensure that you set an investment objective. This will allow you to select the plan that’s capable of satisfying your objective. For instance, if your objective is to plan for your retirement, you could choose a non-participating savings plan that offers guaranteed returns.


2. Ensure that the policy term is in line with your objective


Once you’ve set your investment objective, the next step is to make sure that you select a policy term that’s in line with it. Only then will you be able to make use of the maturity benefits that the plan generates to satisfy your life goals. For instance, if your ultimate end goal is to provide for your child’s higher education, you would need to choose a policy term that coincides with it.


3. Take your needs and requirements into account


Some savings plans offer a lump sum payout upon maturity, whereas others offer you the ability to enjoy a stream of regular and steady income after a certain period of time. Also, they are tax saving instruments as well. Therefore, only by taking your needs and requirements into account will you be able to choose the suitable plan for yourself.


4. Consider your risk appetite


As you’ve already seen above, a savings plan can be either participating or non-participating. Therefore, to be able to choose the one that suits you, you would need to take your risk appetite into consideration. For instance, if you’re a conservative investor, you could look into non-participating savings plans since they offer you guaranteed income.


5. Choose adequate life cover


Although a savings plan gives you an online investment opportunity, it is primarily an insurance product. And so, when selecting a savings plan, ensure that you choose a life cover that’s adequate enough to satisfy your family’s life goals.




Now that you know what savings plans are, make sure you use these 5 tips to choose the right savings plan as your next online investment.


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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.