What is a Savings Plan?
Savings plans are financial products designed to enable disciplined savings while delivering steady returns that help you achieve your financial goals. As they are primarily a life insurance product, these plans also ensure the financial security of your loved ones in case something happens to you.
Key features of a Savings Plan
- Maturity benefit: Savings plans come with an assured maturity benefit. This brings certainty to your savings. Some of the best savings plans also offer guaranteed additions & bonuses that enhance the maturity corpus, thus helping you to achieve your financial goals faster.
- Steady returns: Savings plans offer steady and safe returns. These returns are risk-free, which means you do not lose the money that is committed to you at the time of policy inception, provided you pay all premiums on time.
- Flexible premium payment: Savings plans allow you to pay the premium monthly, quarterly, half-yearly or annually, as per your convenience.
- Life cover: A savings plan comes with a life cover and provides financial security to your dear ones in case something unfortunate happens to you.
Benefits of having a Savings Plan
- Financial Protection: A savings plan provides financial protection to your dependents during the policy tenure. Even if something unforeseen happens to you, your family will be financially independent and will lead the worry-free life you have planned for them.
- Tax1 Savings: Savings plans offer tax1 benefits under Section 80C of the Income Tax Act. Some of the best savings plans also offer tax-free1 maturity proceeds subject to Section 10(10D) of the Act.
- Retirement Savings: Savings plans can be used to build a corpus for your retirement. By portioning a small amount at regular intervals, you can turn a monthly savings plan into a powerful retirement savings engine. Over 30 years, a savings plan can lead to a sizeable amount which can be used to generate a pension for your retirement.
Factors to consider before investing in a Savings Plan
Here are some important factors that you should keep in mind before investing in a money savings plan:
- Goal setting: It is important to set a goal before starting any savings plan. This could be going on a dream vacation, buying an expensive car, making the down payment for a house, funding your child’s higher education or planning a comfortable retirement for yourself
- Risk assessment: Your risk appetite may vary depending on your age, life stage, income and goals. A plan that offers high returns may come with a high risk associated with it. It is important to evaluate the risks associated with various plans and choose a plan based on your risk appetite
- Flexibility: A flexible savings plan can allow you to withdraw your money in case of a financial emergency. This can make you stay prepared for unforeseen difficult times. Many savings plans also offer you the flexibility to choose the premium payment frequency and the payout method as per your requirements. You should look for such flexible features when purchasing a savings plan
- Plan features: Different plans come with different features and you must pay attention to how each feature benefits you. You should try to look for plans that provide you with features like flexible premium payment options, free withdrawals, additional benefits on purchasing online, and more. Also, look for a trustworthy brand name so that you can be assured that your money is safe
Who should opt for a savings plan?
A savings plan is a versatile product that is relevant for people from different life stages, having different income levels and with different financial goals.
- Life Stages: Savings plans are beneficial everyone who hasn't crossed the retirement age. Whether you have just joined your first job, or have started a family or are some years away from retirement, a savings plan is ideal for most life stages of your life.
- Income levels: The premium for a savings plan depends on your financial goals. You do not have to earn a lot to afford a savings plan. The focus is not just on the amount you save, but more on how long you can follow through with your plan. However, do make sure that the sum assured for the life cover is enough to cover the present & future financial needs of your family.
- Financial Goals: Savings plan can be used to meet a variety of financial goals like purchasing a house, buying a car, your child's higher education and marriage, and your retirement. No matter what the financial goal, the best savings plans will always help you attain it.
How to compare different savings plans?
There are a lot of savings plans available today. To choose the best savings plan, one should consider the following factors:
- Size of life cover: The size of the life cover being offered is an important parameter. The more the life cover offered, the better the plan.
- Premium: The best savings plan for you will be the one that fulfils all your requirements and at the same time, also fits into your budget.
- Company Credentials: – Savings plans involve investing over a long period of time. Hence, it is important to ensure that the insurance company is stable with a sound financial position and would be able honour its commitment even several years after the original promise was made.
Why choose a savings plan from ICICI Prudential Life Insurance?
Savings plans from ICICI Prudential Life Insurance come with the following benefits:
- Savings with the comfort of guarantee
- Life cover to secure your loved ones
- Flexibility in premium payment
- Easy liquidity
- Cash benefits and additions
- 3 plan options to choose from: ICICI Pru Future Perfect, ICICI Pru Cash Advantage and ICICI Pru Savings Suraksha
1. How much money should I start saving at the age of 25?
The amount of money you should save at any given age depends on several factors. These factors include your income, debts, day-to-day expenses, long term and short term goals, and many more. Hence, it is difficult to specify a fixed amount that you should save. However, a common rule that may be helpful is saving 20% of your income2. This can help secure your future without having to compromise on your present needs and aspirations.
2. How much money should I accumulate using a savings plan?
Your savings requirement depends on your financial goals. For instance, if your goal is to buy a house, you would need to save and invest more rigorously. It is difficult to identify a fixed amount that can fit everyone’s goals and needs. However, as a rule of thumb, you should always aim to keep aside up to 4-6 times of your monthly salary. You can check out our calculator to find out the amount you would accumulate by investing regularly.
3. Can savings plans help to save tax?
Yes, an insurance savings plan is a great tax saving tool that can boost your overall income and reduce your taxes significantly. The premium paid towards a savings insurance plan is tax-exempt1 under Section 80C of the Income Tax Act, 1961. Some savings plans also offer tax-free1 maturity benefits under Section 10(10D) of the Income Tax Act, 1961.
4. Who is eligible to invest in a savings plan?
Anybody who wants a risk-free and assured savings tool can invest in a savings plan. The minimum age criterion to invest in a savings plan can range between 0 and 18 years, while the maximum age criterion is 60 years.
5. Should I pick a long-term or a short-term savings plan?
The term of your savings plan will entirely depend on your goal. For instance, if you are saving for a short-term goal like travel or a house renovation, you can consider purchasing a short-term plan. This will help you build your savings at minimal risk that can mature in the required timeframe. However, if you have a long-term goal like buying a house or saving for your child’s education, you can consider a long-term savings plan. A longer timeframe will help you accumulate more savings. Moreover, the longer you stay invested, the longer you can continue to take advantage of tax benefits too. So, make sure to invest in a plan accordingly and stay invested in the plan.COMP/DOC/Jun/2021/36/5937
1 Tax benefits under the policy are subject to conditions under Section 80C, 10(10D),115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any will be charged extra by the redemption of units, as per applicable rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above
2 Follow the 50/30/20 rule to get your finances in order - https://www.livemint.com/money/personal-finance/follow-the-50-30-20-rule-to-get-your-finances-in-order-11616925763713.htmlICICI Pru Future Perfect UIN:105N153V01 ICICI Pru Cash Advantage UIN: 105N132V01 ICICI Pru Savings Suraksha UIN:105N135V02 COMP/DOC/Oct/2020/1910/4632