A savings plan, also known as endowment insurance, is one of the best types of life insurance. It is highly beneficial because you can easily combine insurance and investment elements to meet your family’s financial goals. You can do this while your life stays covered and your family has a monetary cushion to fall back on if anything unexpected were to happen to you.
What is a Savings Plan?
A savings plan is a traditional life insurance plan offering both life coverage and guaranteed savings. In this plan, if the life assured, i.e., the person on whose life the policy has been taken, dies within the policy tenure, the entire coverage amount, i.e., the sum assured or the death benefit would be paid to the nominee, and the policy would terminate. However, if the life assured survives the entire policy tenure, a maturity benefit is paid out to the policyholder.
Thus, by opting for a savings or endowment plan, you can fulfil two financial objectives in life. One is of protection, i,e. Life insurance coverage and the other one is guaranteed returns.
Top 5 tips to keep in mind while opting for a Savings Plan:
To get the most out of your endowment plan, you must be mindful and cautious when buying the policy. Read on to get some handy tips on how this can be achieved.
Financial needs:
The main reason to buy life insurance is to protect the economic health of your family in case something untoward were to happen to you. For this, you need to opt for coverage that is large enough to cover all the family members’ financial requirements. Therefore, when opting for a savings plan, ensure you take all the factors, such as your child’s education costs, your parent’s medical costs, your family’s household expenses, including rent, your loan liabilities and all other important financial responsibilities that you have. You need to consider the duties of the present and the future and choose a coverage amount large enough to keep your loved ones monetarily safe after you are gone.
Investment goals:
As mentioned above, a savings plan combines insurance and investment. While you think of the coverage amount when calculating the life insurance needs, you also need to keep the investment angle in mind when buying the ideal endowment plan. Think of the financial goals you have that you wish to realise with your savings plan. Are you saving up for your daughter’s marriage? Do you wish to buy a bigger house for your family? Are you keen on sending both your children abroad for their higher studies? Once you know what your financial goals are, you will be able to choose the perfect plan that will fetch you the returns you need to meet these economic milestones with ease. Savings plans are flexible, so ensure you get a policy that meets your requirements.
Other forms of insurance or income:
You have to factor in the other forms of income your family has. If your spouse is also working and you are not the primary breadwinner of the family, you can opt for a lower coverage amount. If your parents also receive a pension and contribute to the household expenses, your financial responsibility will be lower. Apart from this, consider your family’s loan liability. Do the maths properly and select a plan that offers sufficient coverage while allowing your family to smoothly carry out all the financial matters without having to face any challenges after your death.
Available riders:
Riders are add-on covers that allow you to customise your policy. However, every rider is available at an added cost, so the higher the number of riders, the higher your life insurance premium will be. Some of the common life insurance riders are the accidental death benefit rider, the critical illness rider and the waiver of premium rider, among others. Choose your riders very carefully, keeping the needs of each family member in mind. This will help you to have the best and most effective life insurance coverage at the best rate.
Claim settlement process:
Finally, you need to consider the insurance provider’s reputation when choosing a savings plan. Choose an insurer that has a high claim settlement ratio. Also, look for insurers who have a high and impressive online presence. Their website must offer tools such as the compound interest calculator to smooth your insurance experience. A reputed insurance provider will also have good customer support to help you whenever you have a doubt or query about your life insurance policy.
To wrap it up
Remember, life insurance is a very person-specific financial product. Hence, the one-size-fits-all concept does not apply to any life insurance plan, including a savings plan. You have to be very clear with your requirements and preferences when selecting the most appropriate savings insurance plan. You cannot blindly buy the policy your brother did, as his family’s needs may be very different to your family’s needs. Do your research, assess your exact needs, see your budget and then get a policy that would help you meet your financial goals and also safeguard your family’s wellness after your demise. Thankfully, there are many good savings plans available in India, so choose the one that suits you the best.
