Factors to Consider While Investing in Saving Plans
Sep 13, 2020
(3 min read)
(3 min read)
Savings plans are typically life insurance plans, which allow a different possibility to the person to save and accumulate a corpus for the future.
Along with the benefit of wealth collection, the savings plan also allows the benefit of insurance coverage. Through the savings plan, a death benefit is given to the nominee of the plan in case of an ill-fated death of the insured during the policy tenure.
By investing in the savings plan, a person can build a financial buffer for the future and can also get the benefit of tax saving. But, there are several factors which should be analysed while investing in savings plans.
Risk Profile: It is necessary to manage one's risk appetite to find the best savings plan in India. Age and personal circumstances are essential determinants of the kind of risk one can take. Ordinarily, young people in their 20s and early 30s can choose the higher risk but profitable return options. They can select more aggressive investment plans – those who invest one's money more in the equity share of the stock market and lesser in debt.
Investment Tenure: Insurance plans provide a mid-to-long-term investment horizon and serve as one of the tax-saving investment options. The ULIPs are very beneficial as they help build up a healthy corpus over the life of the plan. The policyholder can start with a small premium amount and build it up over the policy term. This is plausible as most insurance companies know the fluctuating characteristics of earnings and savings depending on the age of the investor. It also provides options where the premiums and the investment amount can be increased or decreased as per the person's preference.
Final Goals: One should be transparent about the purpose of choosing a savings plan. The final goals help in arranging tax saving investment options. Objectives range from creating a corpus for retirement or having adequate money for a child's higher education or marriage to buying a house.
Features of the plan: Several plans have several features. The most beneficial tax saving investment plans enable one to make partial withdrawals by yielding a particular portion of the policy while getting other benefits. Some investment choices have a fixed cover ranging from 5-10 years to 30-35 years, depending on what one wants. Others provide life cover. With extensive coverage and flexible options, one can enjoy security as well as growth through savings. Some policies also offer bonuses, the amount of which is determined by the insurers based on the performance of their investments.
Flexibility: For long-term purposes, this saving plan enables one to take care of unforeseen short term requirements. They allow the flexibility of yielding the policy if the situation demands it. However, it is better to adhere to the tax saving plan for the longer term so that they give more significant returns.
Charges of the Best Saving Plans: Knowing the costs and expenses associated is essential when choosing a saving plan in India. These best savings plans have least payments and provide flexibility in terms of cash withdrawal, bonus receipt and duration of the policy. Additionally, the long-term impact of these prices is much less and makes a tax saving investment plan a numerous way to build wealth at a low cost.
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