The most common confusion that you can face is an insurance plan that you have to purchase for yourself. There is a host of insurance options that you will come across and it is important to know which type of plan will be suitable for you. Term insurance plans and savings plans are two very different products which cater to different types of customers. Hence, it is extremely important for you to know which type of insurance product will be suitable for you depending on your needs and future goals.
Term insurance can be called the purest form of insurance since it covers you against the risk of death, and death alone. The nominee is paid a lump-sum amount called the death benefit in case you die before the end of the policy term. You do not receive any benefits in case you survive the term.
If you are looking for a product which not only provides you a protective cover but also allows you to maximise your savings and build a corpus for your future needs, then you must purchase a savings plan. There are products like Endowment Plan, ULIP and Money Back Plan which allow you to receive a regular flow of income as they invest your money in different investment tools as per your appetite for risks. The returns will certainly vary depending on the type of plan you have purchased, but you will surely get to build a corpus which will allow you to take care of your long-term goals.
It is important to know which type of insurance you should purchase as both, a term insurance plan, and a savings plan, are two very different products.
A term insurance plan is suitable for you if you want to provide a cover to your family in case something happens to you and don’t want them to face any financial burden of taking care of your immediate financial liabilities such as repayment of loans, EMIs, utility bills, etc. In case something happens to you, the nominee will receive a lump-sum amount called the death benefit which will provide your family with the monetary support they would need in your absence. It is always recommended that you purchase a plan with a longer tenure so that you can live a stress-free life and without having to worry about the future of your loved ones even in your absence.
If you are someone who wants a product that provides both insurance coverage and the option to invest your money in different investment tools, then it is recommended that you purchase a savings plan. You may have long-term goals such as buying a home, getting your children educated, or purchasing a new car for which you will need a savings plan. This type of plan will not only keep you stress-free by providing you cover but also help you in maximising your savings so that you can achieve your future dreams.
There are various savings plans which you can purchase depending on your appetite for risks and your financial abilities. You can then accordingly build a corpus for yourself which can then take care of your future goals.
It also goes without saying that you will also receive tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
|Term Insurance Plan||Savings Plan|
|Provides only insurance.||Not only provides cover but also allows you to invest your money in various market instruments.|
|Premiums payable are cheap.||Premiums payable are expensive.|
|No maturity benefit available.||Maturity benefit available.|
|Consists of only death benefits.||Consists of both death and maturity benefit.|
|No returns are possible.||Returns may vary depending on the plan and your appetite for risks.|
In the end, both term insurance plans and savings plans are brilliant products which you can avail. If you have immediate financial liabilities and simply need an insurance plan that can cover your family in case of your absence then you can purchase a term insurance plan. If you are looking for a product which not only provides you cover but also allows you to grow your savings, keeping in mind your future goals, it is highly recommended that you buy a savings plan.
You must not purchase just any plan for yourself. You must do proper research and compare different plans before zeroing in on the most suitable one for yourself. You must be sure about your future needs and goals and based on that make a decision regarding the type of plan which you think will be suitable for you.