Invest and insure with the best saving schemes in India for 2024

Generate wealth with savings life insurance

Savings plan combines wealth creation with life insurance. Like any other insurance policy, savings plans require policyholders to make regular premium payments. Based on policy conditions, these payments can be due monthly, quarterly, or annually for a specified term. These premiums are invested by the insurance company in low-risk instruments at a fixed interest rate. In due course, the invested premium amount grows and provides returns. You can choose to yield returns either through regular payouts, a lump sum at the end, or a mix of both. 

Savings life insurance plans encourage disciplined saving in policyholders, while also offering financial security to the beneficiaries in case of the policyholder's death.  All best saving schemes focus both on safety and on reasonable returns.
 

Dual benefits in one package

As the name suggests, savings life insurance policies offer a strategic combo of dual benefits of both savings and of life insurance. They do so in following manner:

a) Guaranteed Returns

Savings life insurance policies often come with a guarantee of returns, which means that the insurer promises a fixed amount or a percentage of your premiums back at the end of the policy term. These guaranteed returns are typically derived from the sum assured and may include a fixed interest rate, ensuring that you receive a specific amount upon maturity, regardless of market fluctuations. This feature provides stability and predictability, making it easier to plan for future financial goals.

b) Maturity Benefit

The maturity benefit is the amount paid to the policyholder or beneficiary when the policy term ends. This benefit generally includes the sum assured, plus any additional bonuses or interest accumulated over the policy term. It represents the total value of the policy at its end, which is paid out as a lump sum or in a structured manner, depending on the policy terms. The maturity benefit helps in achieving long-term financial objectives, such as funding a child’s education or planning for retirement.

c) Survivor Benefit

In the event of the policyholder’s death during the policy term, the death benefit is paid out to the designated beneficiary. This benefit typically includes the sum assured plus any accumulated bonuses or interest. The death benefit ensures financial protection for the policyholder’s family, providing them with financial support to cover living expenses, debts, or other financial needs in the absence of the policyholder.

d) Bonuses

Bonuses are additional amounts added to the policy’s value, based on the insurer’s performance and policy terms. These bonuses can be classified into vested (guaranteed) and non-vested (discretionary) bonuses. Vested bonuses are assured and are added to the policy's value, while non-vested bonuses depend on the insurer's financial performance and may vary. Bonuses enhance the policy's value and increase the final payout, making it more lucrative for policyholders.

e) Tax Benefits

Savings life insurance policies offer significant tax advantages under various sections of the Income Tax Act, 1961. Premiums paid are eligible for deductions under Section 80C, and the maturity proceeds, including the sum assured and bonuses, are generally exempt from tax under Section 10(10D), provided certain conditions are met. These tax benefits reduce the effective cost of the policy and enhance its overall attractiveness. Similarly, Section 80D can provide tax deduction on medical expenses through health insurance in India. 

f) Loan Facility

Many savings life insurance policies allow policyholders to take a loan against the policy’s cash value. This feature provides a financial cushion in times of need without having to surrender the policy. The loan amount is typically a percentage of the policy's surrender value, and interest is charged on the loan. The policy remains in force as long as the loan and interest are repaid, providing flexibility in managing financial emergencies.

g) Flexibility

Savings life insurance policies offer various flexible features to cater to individual financial needs. Policyholders can often choose their premium payment frequency (monthly, quarterly, annually) and adjust the policy term or sum assured as needed. Some policies also allow changes in the premium amount or policy tenure, providing adaptability to changing financial circumstances.

h) Surrender Value

If a policyholder decides to terminate the policy before the end of the term, they may receive a surrender value. This value is a portion of the policy’s accumulated value and is calculated based on the premiums paid and the duration for which the policy has been in force. The surrender value provides a way to recover some of the invested funds, although it might be lower than the total premiums paid or the maturity benefit.

i) Optional Riders

Optional riders are additional benefits that can be attached to a basic savings life insurance policy for enhanced coverage. These riders include options such as critical illness cover, accidental death benefit, disability cover, or income protection. Riders offer extra protection against specific risks and can be tailored to meet individual needs, providing comprehensive financial security beyond the standard policy benefits.

Various types of savings plans

Before investing, it is essential to understand the different types of savings plans available in India and the mechanics of each plan. Here’s an overview of the different types of life insurance savings plans available:

a) Endowment plan

Endowment plans provide life insurance coverage and accumulate savings over a specified period. On maturity, they pay out a lump sum including bonuses, if any. They combine protection with savings, offering financial security and a corpus for future needs, with tax benefits under Section 80C.

b) Whole life insurance

Whole life insurance offers coverage for the insured's entire lifetime, typically up to age 99. It provides a death benefit at any time during the insured's life and may include a maturity benefit if the policyholder survives the policy term. It also builds cash value over time.

c) Unit Linked Insurance Plan (ULIP)

ULIPs combine life insurance with investment options. A portion of the premium covers life insurance, while the rest is invested in equity, debt, or balanced funds. The returns depend on market performance, and the policy offers flexibility in fund allocation and partial withdrawals.

d) Money back plan

Money back plans offer periodic payouts during the policy term, in addition to a lump sum on maturity or death. These plans provide regular income through specified intervals and ensure financial stability with both insurance cover and savings, making them suitable for periodic financial needs.

e) Child plan

Child plans are designed to secure a child's future education and marriage expenses. They provide financial protection and accumulate savings, offering a lump sum on maturity or in case of the policyholder's death. Some plans include premium waivers and regular payouts for the child’s needs.

f) Retirement plan

Retirement plans provide financial security after retirement. They accumulate savings over the policy term, offering a regular income post-retirement or a lump sum at maturity. These plans help in building a corpus for retirement, ensuring a stable income stream during the retirement years.

g) Endowment plus plan

Endowment Plus plans blend insurance with market-linked investments. They offer life coverage along with higher potential returns from investments in equity, debt, or balanced funds. These plans provide both protection and savings benefits, with returns dependent on the performance of the chosen investment funds.

h) Term insurance with Return of Premium (TROP)

TROP policies offer life cover for a specified term and return all premiums paid if the insured survives the policy term. They combine the features of term insurance with a savings component, ensuring that the premiums are refunded if no claim is made during the policy term.

i) Group insurance plan

Group insurance plans provide coverage to a group of individuals, such as employees of a company or members of an organization. These plans are often more affordable than individual policies and offer basic life coverage, with some plans including additional savings or investment components.

Each of these policies have unique features tailored to different financial goals and needs. When selecting a life insurance savings plan, it's important to evaluate factors such as your financial goals, risk tolerance, and the specific advantages of each policy. Let’s explore these considerations in more detail.

Documents required

The documents required for a savings insurance plan can vary depending on the insurance provider and the specific policy. However, commonly required documents include:

> Identity proof: A government-issued ID such as Aadhaar card, passport, voter ID, or driver's license.

> Address proof: Utility bill, bank statement, rental agreement, or a government-issued ID showing your current address.

> Photographs: Recent passport-sized photographs (usually 2-3).

> Age proof: Birth certificate, passport, or any other document that verifies your date of birth.

> Income proof: Salary slips, income tax returns, or bank statements showing your income.

> Medical history: Some plans may require a medical history form or reports, especially if you have pre-existing health conditions.

> KYC (Know Your Customer) documents: For compliance with regulatory requirements.

> Bank details: A canceled cheque or a bank statement for direct debit instructions.

Always check with the specific insurance provider for their exact requirements, as additional documents may be needed depending on the policy and your individual circumstances.

Top saving plans in India for 2024

Here are some of the leading insurance companies offering best saving scheme with highest interest rate in India and their key features:

Visit OneAssure or call us at +91 6364334343 to connect with our expert advisors. Receive 100% unbiased recommendations tailored to your needs.

Difference between pure coverage and savings plan

Pure coverage focuses exclusively on providing a death benefit, while savings plans offer both life coverage and a savings or investment component. Here’s how:

a) Pure coverage: This type of life insurance, often known as term life insurance, focuses solely on providing financial protection in the event of the policyholder’s death. It does not build cash value or offer any investment component. The primary goal is to offer a high coverage amount for a specified term (e.g., 10, 20, or 30 years) at a relatively lower premium cost. If the policyholder passes away during the term, the beneficiaries receive the death benefit. If the policyholder outlives the term, no benefits are paid out. Find top company products for term insurance plans here. 

b) Savings plan: This category typically refers to life insurance policies that combine coverage with an investment or savings component. Examples include whole life insurance and endowment plans. These policies not only provide a death benefit but also accumulate cash value over time. The policyholder can often borrow against this cash value or use it to pay premiums. These plans generally have higher premiums compared to pure coverage policies but offer the added benefit of a savings or investment component that grows over time.

Pure coverage offers high protection at a lower cost and is suited for temporary needs, while savings plans serve those who want to combine insurance with savings or investment benefits. Knowing the difference between the two can help you better align your policy with your financial goals and manage costs effectively. Inform yourself on similar distinctions with more blogs on insurance compare.

Bottomline

A savings plan is invaluable for anyone aiming to secure their financial future and achieve specific goals. It offers a structured approach for managing and growing wealth, making it ideal for individuals with various financial objectives, whether they’re saving for a down payment on a house, funding education, or planning for retirement. Young professionals, initiating a savings plan early in their careers can establish a solid foundation for future financial stability and wealth accumulation. Families with children can use these plans to manage expenses, save for their children's education, and ensure financial stability during unexpected situations.

Even individuals with irregular income, such as freelancers or self-employed individuals can stabilize finances through  a savings plan. Providing a buffer during lean periods and helping manage cash flow. Overall, a savings plan not only helps in reaching short-term and long-term goals but also provides a sense of security and peace of mind, enabling better control over one's financial future. For further guidance, book a free consultation with our experts here.