In this day and age, financial security plays a pivotal role in loving a stress-free life. It is not just about making money in the present but also about your future and that of your loved ones. Fortunately, term insurance now comes with savings plans, making it much easier to unburden yourself and take care of the necessities of your family in cases of untimely death in the family.
What are Savings plans, and how do they work?
Savings plans are a form of term insurance policies that offer more than death benefits. You can purchase Term Insurance plans for limited periods, but the period may vary from 10 to 100 years. If the insured individual unfortunately passes away during the insurance period, then the family can claim the death benefit. However, if the insured survives the term of their insurance plan, then the insurance provider facilitates the maturity benefit instead of the death benefit.
They come with many advantages for the insured’s family. If the insured was the primary wage earner, the savings plan helped the family pay bills and sustain their livelihood while planning their future. If the insured survives their term plan, they can use the maturity benefit to plan their financial obligations, pay back loans, pay mortgages, invest for the future, etc.
You can also opt for tax savings plans, which, as the name suggests, help you save money on taxes. You are not obligated to pay taxes on the amounts you invest in the savings plan or the maturity benefit. These are apt financial tools.
What are the best savings plans?
Millennials have a lot of advantages when it comes to acquiring knowledge. You can spend hours online, learn much about finance, marketing, banking, etc., and develop important skills to upgrade your profile. However, striving towards a job with knowledge and skills isn’t enough in this fast-paced world in which we live. You need ways to build wealth and sustain it for longer periods to reduce future stress.
Here are some excellent savings plans that help build wealth in the long term, especially for millennials who have the world at their fingertips:
- Endowment Plans:
These are the most popular savings plans for millennials. You can opt for endowment plans as a participating or non-participating insured. The difference is that participating insured individuals receive bonuses.
When the endowment plans mature or are claimed after an unfortunate, early death, you can opt for varying payout plans. To elaborate, you could accept the death benefit or maturity benefits claim as a lumpsum amount. This allows you to tackle major expenses and reinvest the sum as you see fit.
You can also accept the claim amount in parts, so it serves as monthly earnings. That way, you have more money to come in the following month and can still tackle your expenses without losing the entire amount in a brief period.
- Money-back Plans:
Another excellent savings plan is money-back term insurance. If you purchase this plan, the insurer pays a predefined sum regularly and clears the remaining claim when the policy matures. These are known as survival benefits.
The perks run deeper than just the sum insured, though. The insurance provider pays benefits in parts while the insured is still alive and well. Once the plan matures, you get the remaining sum insured. However, let’s say the insured receives periodic payments within a 10-year tenure at the 2nd, 4th, and 6th year. You can use the power of compounding calculator to predetermine the intervals and sum of money to receive. Sadly, suppose an untimely death befalls and the family must claim the death benefit. In that case, the entire sum insured will be paid to the beneficiary even if you received the instalment money-backs during the tenure. - National Pension Plans:
It is important to plan for old age; therefore, the government also offers financial products for which you can invest regularly. The corpus accumulates over time, and you can reap the benefits when it matures at retirement age. This plan is also subject to the rate of inflation, so you can use the power of compounding calculator to determine whether the aggregate sum that you are due to receive at your time of retirement is enough to meet the requirements of that era. - Public Provident Fund:
It is a form of savings plan the government provides and is tax deductible under section 80C. You save a certain sum for a specific duration, and you receive the money back when it matures. Remember, though, that the plan, although beneficial, is subject to inflation. So, use the power of compounding calculator to determine your earnings during PPF maturity. - Fixed Deposits– Another savings plan is the FD, which allows you to lock in a certain sum of money for a predetermined period. You can earn interest on the amount, but it will be taxable unless you are a senior citizen, which is deductible. There are also provisions under Section 80C that allow you to claim deductibles if your amount is deposited for 5 years or more. The power of compounding calculator would be helpful to determine your actual earnings from a fixed deposit savings plan.
Although the alternate savings plans seem easily accessible, the inflation rate reduces the value of the total sum received at maturity. However, the Endowment and money-back life insurance plans offer better benefits. Not only do they act as a long-term savings plan, but upon claiming the policy, you receive a much higher death benefit or maturity along with added perks.
Conclusion
In these economically challenging times, being well-informed about the various money-making and savings plans available in the market is of primary value. After all, you work hard for your money. You must build ways to preserve some of it with guaranteed returns so you and your loved ones can live more carefree lives. Life is short, and these savings plans are excellent financial tools to protect you and your family in emergencies.
You can combine savings plans to further enhance your financial security in the future. Insurance plans ensure security in times of need, while non-breakable funds such as FDs and PFs help save more money for a rainy day. Combining both with term savings plans such as endowment, money-back plans, or even ULIPs could help boost your financial situation over time.