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What is a Savings Plan? - Definition
A Savings Plan is a Life Insurance Plan where the Policyholder invests a certain amount of money to get a fixed maturity amount at the end of the Policy Term and also provides life insurance coverage. Savings Plans help you achieve life goals and build a financial corpus to take care of future requirements. Savings Plans can be combined with add-on riders such as Critical Illness Rider and Accidental Death Benefit Rider to enhance Policy Benefits.
What are the different types of Savings Plans available in India?
Ther different types of Savings Plans available in India are as follows:
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Unit Linked Insurance Plan
A Unit Linked Insurance Plan combines the benefits of Insurance Protection and Wealth Creation. A part of the Premium is invested in various market linked instruments whereas the remaining part is invested in offering Life Insurance Protection. You can invest in various types of funds including hybrid, equity, debt, etc. depending on your risk capacity.
Features of Unit Linked Insurance Plans
- A Unit Linked Insurance Plan flexibility to invest in various funds including Equity, Hybrid and Debt Funds. You can also shift amongst various funds depending on Market Conditions
- ULIPs provide Death Benefit in case of the Policyholder’s demise
- The Returns from ULIP vary based on Market Fluctuations
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Money Back Plan
A Money Back Plan is an Investment Plan that offers life insurance coverage as well as regular payouts to the Policyholder during the Policy Period. The Policy combines the benefits of Insurance and Investment.
Features of Moneyback Plans
- A Money Back Plan provides a Death Benefit to the nominee in case of the policyholder’s demise during the Policy Term.
- A Moneyback Policy provides periodic payouts during the Policy Term and thus it offers certainty of cash flows to the Policyholder.
- A Moneyback Policy offers Maturity Benefits where the Policy pays a lumpsum amount if the Assured survives the Policy Tenure.
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Endowment Plan
An Endowment Plan combines the benefits of both Insurance and Investment and provides a Life Cover as well as a Maturity Benefit. The Plan provides a Maturity Benefit in case the Policyholder survives the Policy Term and a Death Benefit in case the Policyholder dies during the Policy Term.
Features of Endowment Plans
- Endowment Plans provide both Life Insurance Coverage and an Investment component
- An Endowment Plan pays a lumpsum amount to the Policyholder as a Maturity Benefit upon Policy Maturity
- An Endowment Plan provides a Death Benefit to the nominee in case of the policyholder’s demise during the Policy Term.
- Policyholders can choose from various premium payment modes such as monthly, quarterly, half-yearly, or annually.
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National Savings Certificate
A National Savings Certificate is a fixed income investment scheme which encourages small and mid-investors to invest by offering a good rate of return.
Features of National Savings Certificate
- The National Savings Certificate earn a fixed rate of return which is revised every quarter. Currently National Savings Certificate offer a rate of return 7.7% pa.
- You can start investing in National Savings Certificate with an amount of as low as Rs100
- You can invest in a National Savings Certificate (NSC) from your nearest local post office.
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Kisan Vikas Patra
Kisan Vikas Patra provides fixed rate of return to investors. The Scheme was launched by the Government of India in 1988 with an objective to promote long-term financial savings.
Features of Kisan Vikas Patra
- Kisan Vikas Patra Certificates can be purchased at any of the local post office or at select Public Sector Banks.
- Kisan Vikas Patra has a Tenure of 113 months.
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Public Provident Fund
Public Provident Fund is a low-risk, long-term savings scheme backed by the Government of India. The interest earned on Public Provident Fund is tax-free, which makes it an attractive investment option.
Features of Public Provident Fund
- You can invest as low as Rs500 to Rs1.5 lakh in a Public Provident Fund.
- Public Provident Fund currently offers interest rate of 7.1%
- The Contributions made to the Public Provident Fund Account are eligible for Tax deductions under Section 80C of Income Tax Act, 1961. The Interest Earned on the PPF Funds is also Tax-Free
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Employees Provident Fund (EPF)
Employees Provident Fund is a retirement scheme available to salaried employees in India. The Fund was launched by Employees Provident Fund Organisation (EPFO)
Features of Employees Provident Fund
- The Employer and Employee, both need to contribute 12% of the basic salary to the EPF Account.
- The EPF Fund helps you to create a retirement corpus.
- Contributions to EPF Account are tax-deductible under Section 80C of the Income Tax Act, 1961.
- The EPF provides guaranteed return on your investment.
- Currently EPF offers an interest rate of 8.25% pa
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Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme is a government back savings scheme for individuals aged 60 years and above. The Scheme can be opened at any of the Post Offices or authorised banks.
Features of Senior Citizen Savings Scheme
- An individual of at least 60 years of age can invest in a Senior Citizen Savings Scheme.
- The Tenure of Senior Citizen Savings Scheme is 5 years which is further extendable by 3 years
- Contributions to SCSS are tax-deductible under Section 80C of the Income Tax Act, 1961.
- Currently SCSS offers an interest rate of 8.2% pa
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Sukanya Samriddhi Scheme
Sukanya Samriddhi Yojana is a government backed scheme launched in 2015. A Guardian can open a Sukanya Samriddhi Savings Account for a Girl Child.
Features of Sukanya Samriddhi Scheme
- This government scheme is aimed at promoting welfare and child education of girls. Legal guardians or parents of a girl child can invest in this scheme.
- Currently, Sukanya Samriddhi Account offers an interest rate of 8.2% p.a.
- This scheme also offers tax benefits under section 80C of the Income Tax Act, 1961.
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Atal Pension Yojana
Atal Pension Yojana is a pension scheme launched by the Indian Government in 2015. The Scheme provides pension benefits to people in the unorganised sector and is controlled by the Pension Funds Regulatory and Development Authority (PFRDA)
Features of Atal Pension Yojana
- Atal Pension Yojana is a Pension Scheme which provides a steady stream of income to all Indian Citizens after the age of 60 years. The scheme is focused on people working in the unorganised sector such as domestic helps, drivers, delivery boys etc
- Private Sector Employees can also apply for the scheme
- The Pension Amount received is proportional to the age and contributions made by the person.
- Beneficiaries receive the benefits in the form of monthly payments.
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National Pension Scheme
National Pension Scheme is an Indian Government Pension Scheme providing pension benefits to all Indian Citizens. The Scheme is regulated by the Pension Funds Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013.
Features of National Pension Scheme
- National Pension Scheme is a Voluntary Contribution which invests in market-linked securities
- Contributions made by subscribers are pooled into a Pension Fund which are invested by Professional Fund Managers into Market linked securities such as Stocks, Bonds, Debentures etc.
- The Contributions continue to grow till retirement
- The Subscribers have the flexibility to decide the asset classes in which to invest their funds
Which are the Best Savings Plan in India?
The Best Savings Plans in India are as follows:
HDFC Life Sanchay Plus
HDFC Life Sanchay Plus Plan is a Non-Linked, Non-Participating Plan Savings Life Insurance Plan which offers Guaranteed Returns for you and your family.
Key Features of HDFC Life Sanchay Plus Plan
- Guaranteed Returns: HDFC Life Sanchay Plus Plan provides a Guaranteed Returns, thus offering financial certainty
- Lifelong Income option: Guaranteed income till 99 years of age
- Long Term Income option: Guaranteed Income for a fixed term of 25 to 30 years
- Flexibility in Premium Payment: You can pay the Premium as a Single Premium or as a Limited Payment Term.
- Flexibility to receive Payouts: You can choose to receive payouts as a Lumpsum amount or a Regular Income, depending on your choice.
- Death Benefit: Policy provides a Death Benefit if the Life Assured dies during the Policy Term
ICICI Pru Gift Pro Plan
ICICI Pru Gift Pro Plan is a Non-Linked, Non-Participating Plan Savings Life Insurance Plan which offers Guaranteed Returns for you and your family.
Key Features of ICICI Pru Gift Pro Plan
- Guaranteed Returns: ICICI Pru Gift Pro Plan provides a Guaranteed Returns, thus offering financial certainty.
- Flexibility to receive Payouts: You can choose to receive payouts as a Lumpsum amount or a Regular Income, depending on your choice.
- Select Duration of Guaranteed Income: ICICI Pru Gift Pro Plan offers the flexibility of selecting the duration of your guaranteed income, as per your requirements.
- Long Term Income option: Guaranteed Income for a fixed term of upto 30 years
- The Plan provides an option to receive future benefits in advance by converting into a lump sum.
- The Plan provides an option to choose Guaranteed Income Option, whether you want a Level Guaranteed Income or an Increasing Guaranteed Income.
Bajaj Allianz Life Assured Wealth Goal – Platinum Plan
Bajaj Allianz Life Assured Wealth Goal - Platinum Plan is a Non-Linked, Non-Participating Individual Life Insurance Savings Plan which protects you with a life cover, while offering you an assured income to meet your immediate as well as future needs. 0 Key Features of Bajaj Allianz Life Assured Wealth Goal – Platinum Plan
- Guaranteed Returns: Bajaj Allianz Life Assured Wealth Goal - Platinum Plan provides Guaranteed Returns, thus offering financial certainty.
- Option to Receive Early Payouts: Bajaj Allianz Life Assured Wealth Goal Platinum Plan provides an option to choose the year from which you start receiving Early Guaranteed Payouts
- Return of Premium: The Plan also provides a Return of Premium at the end of the Income Period equal to 110% of the Total Premiums Paid.
- Long Term Income option: Guaranteed Income for a fixed term of upto 30 years
- Flexibility to receive Payouts: You can choose to receive payouts as a Lumpsum amount or a Regular Income, depending on your choice.
- Death Benefit: Policy provides a Death Benefit if the Life Assured dies during the Policy Term
Kotak Guaranteed Fortune Builder Plan
Kotak Guaranteed Fortune Builder Plan is a Non-Linked, Non-Participating Life Insurance Individual Savings Plan which provides a Life Cover alongwith a Long Term Income Option.
Key Features of Kotak Guaranteed Fortune Builder Plan
- Guaranteed Returns: Kotak Guaranteed Fortune Builder Plan provides Guaranteed Returns with multiple plan options to suit your varied needs.
- Long Term Income option: Guaranteed Income for a fixed term of upto 15, 20 or 25 years
- Early Income: Kotak Guaranteed Fortune Builder Plan provides an option to receive a Guaranteed Income during the Policy Term and a Guaranteed Income after the Policy Term
- Death Benefit: Policy provides a Death Benefit if the Life Assured dies during the Policy Term
What are the Features of a Savings Plan?
A Savings Plan provides the following features:
- Guaranteed Returns: A Savings Plan offers you a Guaranteed Sum Assured which determined at the start of the Policy Period. This guaranteed amount offers financial certainty since the amount that you receive is fixed regardless of the market conditions. Thus, a Savings Plan is a low risk option which offers steady returns over time.
- Maturity Benefit: A Savings Plan pays a lumpsum amount as a Maturity Benefit to the Policyholder, which includes the Sum Assured and any Accrued Bonuses upon Policy Maturity.
- Death Benefit: A Savings Plan also offers a Death Benefit where the Policyholder’s nominee receives the Sum Assured in the event of the policyholder’s demise.
- Riders: You can add various riders to Savings Plans like Critical Illness Rider, Waiver of Premium Rider to enhance Policy benefits.
- Flexible Premium Payment Options: Policyholders can choose from various premium payment modes such as monthly, quarterly, half-yearly, or annually.
What are the Benefits of Savings Plan?
A Savings Plan offers various benefits like Financial Security, disciplined saving habits, and potential for long-term wealth growth. It helps individuals prepare for emergencies and achieve your financial goals. Savings Plans also provide tax advantages and tailored options for specific needs like retirement or education.
The Benefits of a Savings Plan are as follows
- Tax Benefits: Savings plans provide tax savings under Section 80C of the Income Tax Act, 1961, allowing deductions up to Rs1.5 lakh per year. Maturity payouts are also tax-free under Section 10(10D) basis terms and conditions.
- Financial Security: Savings plans offer a financial safety net for you and your loved ones. Savings Plan provide you with a lumpsum amount as a Maturity Benefit if you survive the Policy Term, which can be used for funding your various expenses.
- Life Cover: Savings Plans come with an embedded life insurance component. In case of death of the life assured i.e. the insured person, the nominee receives the Sum Assured, ensuring security of family members in case of your untimely demise.
- Guaranteed Returns: Many traditional Savings Plans offer guaranteed returns, making them ideal for risk-averse investors. With a Guaranteed Savings Plan, you know exactly how much you’ll receive at maturity, regardless of market fluctuations.
- Disciplined Savings and Wealth Creation: A savings plan instils a habit of regular savings because it requires you to start putting a certain amount of money each month or year. This allows you to create a strong corpus through bonuses and returns over a period.
- Flexible Premium Payment Options: Savings Plan offer multiple premium payment frequencies and Policyholders can choose from a monthly, quarterly, half-yearly, or annually premium payment. This provides flexibility to pay premiums in line with your cash flows.
- Flexible Payout Options: Savings plans offer different payout option to meet different financial needs:
- Lump-Sum Payout: A Savings Plan offers a lumpsum payout which is ideal for large expenses like buying property or funding higher education.
- Regular Income: A Savings Plan offering a regular and periodic payout is suitable for post-retirement financial support or periodic expenses.
- Loan Facility Against Policy: You can take a loan against the Savings Plan’s Surrender Value during emergencies, providing liquidity without losing coverage. You can get loan up to 90% of the Surrender Value, ensuring that you don’t have to liquidate long-term investments.
Why should you invest in a savings Plan?
Here are a few reasons why you should invest in a Savings Plan
- A Savings Plan offers stable returns, helping you increase your money over a period of time and also protects you against inflation. Savings plans help you build assured savings as they are a low risk investment option.
- Premiums paid toward Savings Plans are eligible for tax deductions under Section 80C of the Income Tax Act, 1961 and the maturity proceeds may also be tax-free under Section 10(10D) of the Income Tax Act, 1961.
- Savings Plan offer financial security to the family as they provide a death benefit. Thus, the nominee under a Plan receives a lumpsum amount in case of your untimely demise
Who should buy a Savings Plan?
Savings Plans are an attractive investment option for young as well as the old as the Plan can be customises to suit your requirements. Following people should consider investing in a Savings Plan:
- Young Individuals: Young Individuals have room to take greater risks and increase their chances of earning better returns in the future. Buying a savings plan at an early age helps in availing a greater compounding period and building a bigger corpus.
- Married individuals: Young couples should start investing in savings plans as early as possible to ensure the next phase of their lives are secured. Be it planning for a child’s education expenses, buying a house, or starting a business, a Savings Plan can be of great benefit to young couples.
- People nearing retirement: A Savings Plan can be valuable to your retirement planning strategy as it offers Life Insurance Coverage to the family whilst also offering stable returns.
What are the Factors that you should consider before choosing a Savings Plan?
You should consider the below listed factors before investing in a Savings Plan:
- Define your Financial Goals: You should clearly define your short-term and long-term goals to match the plan’s features (e.g., retirement, child’s education). If your financial goals are aligned with your savings plan, then you don’t have to liquidate your other savings and can utilise the accumulated amount for fulfilling the defined goals.
- Premium Affordability: You should ppt for a premium amount that fits well within your budget without having to face any financial strain. Also, you should take into account your income, loans and liabilities and only then decide on the premium you can afford to pay.
- Policy Term: You should choose a Policy Duration that aligns with your financial objectives.
- Returns and Benefits: You must check if the plan offers Guaranteed or Market-Linked Returns and ensure that it suits your risk profile. Also, you need to compare features like maturity benefits, bonuses, and surrender value before you purchase a Savings Plan.
- Riders: You should check optional riders like Accidental Death Benefit Rider, Critical Illness Rider, or Waiver of Premium Rider for enhanced Policy coverage.
- Liquidity: You should understand the plan’s Lock-In Period and Partial Withdrawal Options, if any. For instance, ULIP plans have a lock in period of 5 years.
- Tax Implications: You should confirm tax benefits on Premiums and Maturity Payouts under section 80C & section 10(10D) of the Income Tax Act, 1961.
What are the Documents Required to purchase a Savings Plan?
Following Documents are required to purchase a Savings Plan:
- Proof of Address like Passport, Aadhaar Card, Driving License etc.
- Proof of Identity like PAN Card, Aadhaar Card, Passport etc.
- Income Proof like Salary Slips, Income Tax Returns etc.
- Medical Reports
- Policy Proposal Form: Properly filled and signed insurance proposal form provided by the Insurance Company.
- Passport Photographs
What are the Factors that impact the Premium of a Savings Plan?
The factors that impact the Premium of a Savings Plan are as follows:
- Sum Assured: Policy Sum Assured is an important factor that impacts the Premium of a Savings Plan. A Savings Plans with a higher Sum Assured will have a higher premium than a Plan with a lower Sum Assured.
- Age: Age of the Policyholder is another factor that impacts the Premium of a Savings Plan. A Policyholder with a higher age will have to pay a higher premium for the Plan as compared to a Policyholder with a lower age.
- Policy Period: Policy Period is another factor that impacts the Premium of a Savings Plan. A Savings Plan with a higher Policy Period will have a higher premium than a Plan with a lower Policy Period.
How to Compare a Savings Plan in India?
You must compare the following factors before investing in a Savings Plan:
- Life Goals: Define Life Goals, as to whether you want to save for retirement, children’s education expenses or marriage and so on.
- Features and Riders: You should carefully consider the various riders available in the Savings Plan which enhance Policy coverage to ensure that you are comprehensively covered.
- Compare Returns: Look at a Plan which offers the maximum returns for maximum savings.
- Premium: You must compare the Premiums of different Savings Plans between Insurance Companies to get the best quotes.
- Claim Settlement Ratio: You should compare the claim settlement ratio of various Insurance Companies to judge their effectiveness in settling claims.
What is the Claim Process for a Savings Plan?
The process to make a death Claim for a Savings Plan is as follows:
- Inform the Insurance Company as soon as possible about the death of the Policyholder
- Submit the Duly Filled Claim Form to the Insurance Company along with the Death Certificate
- Provide the Bank Details to receive the Death Benefit
Get Best Quotes for your Savings Plan with Qian Insurance!
Savings Plans offer financial security with steady returns. It is important to take the advice of an experienced Insurance Broker when choosing a Savings Plan. If you wish to purchase a Savings Plan with Qian, go to Qian’s website – www.qian.co.in or email us at insurance@qian.co.in or call us on 022-35134695 and provide the required details. Our representative will get in touch with you and assist you with different Savings Plans based on Premiums, Features and Benefits. You can select the Policy which best suits your budget and requirements, make the premium payment and purchase the Policy. If you wish to know more about Savings Plan, you can you can email us at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.
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