Life Insurance

Savings Investment Plan

Savings Investment Plan

If you’ve just embarked upon your financial journey, a savings investment plan is one of the best options for you. Being one of the most popular traditional life insurance plans, they cater to your long-term and short-term goals. In addition to this, they also provide you with a life insurance cover.

So - a savings investment plan is the perfect investment option for early investors and people with a low-risk appetite.

Like any other insurance plan, a savings investment is a type of contract between you and your insurance company. You are required to pay premiums in exchange for the plan’s benefits. A portion of your premium is allocated to providing a life insurance cover as financial protection to your family in case you pass away. The rest of the amount contributes to a fund that you can use to pay for your small and big goals.

For instance - You can use a short 4-5 year savings plan to save money to purchase a bike. Or you can also use a long-term plan to save for your house purchase down payment. This can span a few years.

Let’s dig deeper!
 

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Why Should You Invest in a Savings Investment Plan?

Here are some of the benefits of investing in a savings plan:

  • To Achieve Your Financial Goals
    A savings plan is a tool that will provide fixed payouts to meet your financial goals. It encourages you to make systematic savings to pay for any upcoming expenses, whether short or long-term. The investment you make today guarantees a fixed return without risks.
     
  • Improves The Habit Of Saving For The Future
    The more you save, the more secure your future is. A savings investment plan motivates you to save for your future goals, whether short or long-term. This habit will greatly benefit you in the long run when you make complex financial investments.
     
  • It Is A Low-Risk Investment Option
    Savings plans are investments with literally zero risk. Your payout is not affected by market fluctuations like in the case of equity or debt fund investments. So, if you want to simply save and get your money back for a particular goal without worrying about market volatility - savings plans are the best bet for you.
     
  • For The Financial Security For Your Family
    As an added advantage, the savings investment plan will simultaneously provide you with insurance coverage. So, while you focus on achieving your goals, you can also be assured that your loved ones will be financially protected even in your absence.
     
  • It Is An Alternate Source Of Income
    A money-back plan, a type of savings investment plan, gives you a secondary source of income to meet your financial needs. You can use it as a form of passive income for life stages. For instance, buying a vehicle, funding your child’s education, etc.
     
  • Liquidity Options
    In circumstances where you are in immediate need of money, a savings investment plan allows you to withdraw money after a few years. It is regarded as a high liquidity policy that helps you manage emergency needs.
     
  • Loan Availability
    If you invest in a savings investment plan, you can also avail of loans against it without having to submit any other collateral security.
     
  • Riders
    You customise your plan with riders, i.e., add-ons that are available at an additional cost. They help you gain more benefits and coverage under the same plan.
     

Goals You Can Achieve With A Savings Investment Plan

A savings plan is a reliable and risk-free option. The accumulated funds from a savings plan can be put to the best use to meet your future financial needs. It can help you achieve your -

  • Short-Term Goals
    Short-term goals are the goals that envision within the next few years and take lesser funds to achieve. You might have short-term goals like purchasing furniture, getting interior work done, buying new appliances, gifting a trip to your family, etc.

  • Long-Term Goals
    Long-term goals may last multiple decades and require you to save for them in a disciplined manner over time. They involve heavy planning and saving. Long-term goals include buying a house, your child’s education, accumulating retirement funds, leaving a legacy for your family, etc.
     

How Does A Savings Investment Plan Work?

A savings investment plan works similarly to any life insurance policy. You will be requested to provide basic details like age, health conditions, lifestyle habits, income, etc. After choosing the required coverage and policy tenure, the insurer will assess your application. After diligent evaluation of your application, a premium amount and maturity value are fixed. You can enjoy the benefits of the savings investment plan as long as you pay your premiums without lapses.

You will be eligible to get the payouts in one or more of the following types:

  • Maturity Benefit
    When the policy tenure ends, you will be paid the maturity amount that was agreed upon at the time of policy purchase.

  • Death Benefit
    In unfortunate circumstances of your passing away during the policy term, your family will be compensated with a death benefit. The value is equal to the chosen sum assured or a multiple of chosen annual premium - depending on the product you buy and the insurance company you pick.

  • Additional Benefits
    Some plans also provide you with extra benefits like loyalty additions, guaranteed additions, etc. These benefits vary from insurer to insurer.

    Note: Once the policy matures or the death benefit is paid, the policy is terminated.
     

Things to Keep in Mind While Buying A Savings Investment Plan

Here are a few important things you should pay attention to when purchasing the plan -

  • Invest Early
    The younger you are, the lower your savings plan premiums! You can save a good amount of money by investing early. And, saving is a good habit to inculcate early in life - so, buy a savings investment plan as soon as you possibly can!

  • Compare And Choose Various Plans
    There are many different types of savings plans offered by different insurance companies. The coverage and features of all plans vary - as do their drawbacks. Compare all these plans carefully so you can choose the one that first your needs and goals the best.

  • Choose The Right Policy Term
    Jot down the goals you have in mind, both short-term and long-term. Pick a policy term accordingly. It should comfortably accommodate all your goals. For instance, if you plan to buy a house 10 years from now, go for a policy term of 10 years.

  • Premiums That Fit Your Budget
    Always look at your present budget and future finance estimates before finalising the premiums. A savings plan can last a long time and require you to pay premiums diligently, over several months or even years. Make sure you can afford the premiums throughout this period, so you can reap all the benefits of the life cover and the additional bonuses. Any lapses in premium payment can result in you losing the benefits.

  • Lock-In Periods
    A savings plan is a long-term commitment and may come with a lengthy lock-in period, i.e., a time span during which you cannot withdraw the money invested. You should be aware of the lock-in period so you can adjust your goals and timelines efficiently.

  • Understand Your ROI
    Talk to a financial advisor to know about the returns you’ll earn on this investment, and track the same on an excel spreadsheet.
     

Best Term Life Insurance Plans

 

How Much Should You Invest in A Savings Plan?

This question is subjective. Each person will have different needs – some short-term and some long-term. The amount you should invest should depend on the amount you want to get as guaranteed returns. Select an amount depending on your needs, like buying a laptop, flying for a solo trip, saving for your child’s future, leaving behind a legacy for your family, etc.

Conclusion

A savings investment plan doesn’t just save a fund for your future but also promises financial security for your family. It strikes a perfect balance between financial planning and protection for your loved ones. Also, the returns you get from the plan are completely tax-free!