How to choose the right savings plan?

Having a proper savings plan is crucial. There are numerous long-term and short-term savings plans that can not only cater to your emergency monetary needs but also help you gradually grow your personal wealth. While there are many savings plan available in the market, let’s focus of what insurance savings offers  

Why should you have a savings plan? 

To meet your financial goals, you can choose from some of the best savings plans in India. Apart from encouraging savings, here are some key benefits of investing in a savings plan. 

1. Financial protection in emergencies - You can meet unforeseen expenses when you have saved funds. Your emergency fund can help you sail through tough times.

2. Less risky and steady returns - The primary purpose of an insurance savings plan is to grow your wealth without taking too much risk. These plans come with varied levels of risk while allowing you to earn returns and grow your wealth.

3. Tax benefits - You can claim a tax benefit for paying life insurance premium under the old tax regime for savings insurance schemes. 

4. Inculcates the habit of saving - Savings insurance schemes offered by insurance companies like Max life, Tata AIA enable you to make payments either monthly, quarterly, half-yearly or annually. If you want to learn how to save money every month, you can start investing in some of the plans they offer.

5. Helps plan your retirement - Irrespective of your present income, planning your finances for your retirement is essential. insurance savings plans offered by life insurers help you plan a part of your retirement corpus.

Read: Five reasons to get a Term Insurance policy

How to choose the best insurance savings plan for yourself? 

To find a insurance savings plan that suits you, you must take into consideration the following factors: 

1. Savings goal - To find an insurance savings plan which is best for you, you must first understand what you are saving for. Every person has different reasons for savings, and your plan must align with that goal. Some examples are tax savings, wealth generation, planning higher education etc.

2. Risk appetite - Some savings plans offering high returns may also have increased risks. As risk appetite for individuals varies, you need to assess the risk level of an insurance savings plan before investing in it.

3. Investment horizon - If you are saving money to plan for higher education after two years, it won’t be wise to choose a 10-year savings plan. So checking whether the investment horizon of the plan matches your financial goal is another factor that needs your consideration.

4. Flexibility - Savings plans like tax benefit schemes come with a lock-in period. However, some plans offer flexibility to choose the investment amount and tenure. It also enables you to withdraw money in a financial emergency.

5. Portfolio diversification - Having a mix of financial instruments in your portfolio is always wise. A diverse portfolio allows you to access different features of different financial instruments while also protecting against unforeseen situations.