Why savings plans in life insurance are indispensable?

Why Savings Plans in Life Insurance are Indispensable?

Savings plans are always good. A savings plan in life insurance is many times better. It is indispensable. It is secure. It is valuable. A life insurance plan for savings is good for everybody who wish to secure their financial position and build a stable future. Its benefits are many.

The Benefits.

The beauty of life insurance is never understood until we start getting its benefits. Its true for all life insurance policies. The objective of a savings plan is to help a person build reasonable fund base for future. Funds for future use has to be accumulated gradually and has to be disbursed to the concerned person as maturity benefits. It may be in the form of a lump sum amount or it could be something similar to a pension. In either ways, it is always useful for the policyholder. Money is an emancipator and in whichever way it arrives, it is useful.

Some benefits of life insurance savings plans are:

(1) It is a proven method for saving: Life insurance is a time tested and proven method for saving. Life insurance is a safe and sure way to save money. A savings plan gives the policyholder the financial benefits when he is alive. When a person takes a life insurance policy with a savings component, he ensures that his future financial needs will be met in a better way.

(2) Fair returns: Life insurance policies give reasonable returns on its savings products. Usually, returns between the range of 5% to 6.5% is provided by savings products and most policies in life insurance maintain this range. Although, the returns are not too high to woo people, they are useful.

(3) Two advantages in one policy: A savings plan in life insurance has two advantages:

• It covers risks.
• It saves money.

While the main purpose of life insurance is to provide financial protection against risks, its savings plans does both: it saves and protects, which is why it is recommended. Savings in life insurance is multipurpose for this reason.

A savings plan will cover risk because it is a life insurance product and at the same time, it will save money for the policyholder.

(4) It is a financial relief: It is a financial relief for the policyholder who pays all his premiums on time. The real benefits of a savings product begin to unfold after the PPT (Premium Paying Term) is over. When the policyholder starts receiving returns as per the features of his chosen policy, he gets the satisfaction of having a life insurance policy. Although life insurance products won't give instant satisfaction which most other products do, it is still the best for savings because it gives a long lasting and in some policies, an everlasting relief to the policyholder which is far more satisfying.

(5) Premium = Savings: In a savings oriented plan, the premium is not a cost, it is a saving. Although we do say that we pay premium, we are saving the money as premium. In a savings plan, the premium is the deposit and deposits are never considered as cost or expense. This is a fact which most people don't realise.

Common Hesitations in Saving.

Some people hesitate to go for savings plans in life insurance. Some people have some misconceptions too which stop them from venturing into it. Some common misconceptions are:

• Some people think that life insurance is only meant for insuring a person or his family against death or disability.

• Some people don't think life insurance is good for saving. They don't consider savings as a feature of life insurance.

• Some people consider premiums as unnecessary expenditure. They are reluctant to save or invest in life insurance. They argue about the cost of the premiums.

• Some people are so possessed about other avenues like fixed deposits, mutual funds etc., that they overlook the real potential of life insurance. This could be due to the longer tenure for which the premium has to be paid or the longer duration for which the money is held-up.

• Some restrictions which are part and parcel of all life insurance policies also go against its popularity. Restrictions such as age limit, make it impossible for them who have crossed that age. This could discourage some people (not all) to recommend to others who are fit for it.

• Some people don't like term plans. A term plan won't save money for the policyholder because it is meant solely for the purpose of covering risks. Although savings products in life insurance are different from term plans, some people think they are one and the same. Lack of knowledge about different products is yet another reason why people hesitate to put money in life insurance products.

Some Facts.

While misconceptions deter people to go for it, revealing many facts about life insurance do encourage people to take it. People who have benefited from a policy will definitely search for more policies. There are many people who buy more and more policies because they are aware of its benefits.

Some facts about savings products are:

(1) Savings plans in life insurance have many varieties and have wide range of options to select from, which makes it useful for people of all income groups.

(2) Savings oriented policies may serve the purpose of short term and long term requirements of money when policies of different features and tenures are bought.

(3) Savings policies for children are truly beneficial for their future. It is as essential as education. Policies for children could be used to meet specific needs like higher education, or it could be used for the purpose of further investments when the child grows up.

(4) Savings plans do help in diversification when properly planned and implemented. The returns and maturity benefits provide good financial support for a family. As the money at maturity is big, it could be used for investments such as annuity plans or fixed deposits.

(5) Although, a savings plan won't cover risks as a term plan does, it supports the policyholder financially.

Start Early.

The most important thing is to start as early as possible, because in life insurance, people who start early get the most benefit. People are not afraid of life insurance policies, but they tend to behave so cautiously, that they waste many opportunities before they get one.

Wait and watch for some more time is an unspoken habit of most people and this is why many opportunities slip away from them. Procrastination never helps. Waiting for a better product is not always a wise decision, more so when we don't know when it will arrive. The reason for urgency in life insurance comes from the fact that after a certain age, people become unfit for a policy.

Better Late than Never.

People who are late, should not overlook it, because they too can gain from it. It is true that life insurance plans are not for everybody, because age is a factor which determines insurability and other benefits. However, people who are closer to the maximum age limit should also consider it if they meet the underwriting guidelines and if they can afford to pay premiums. Not all is lost if they are still in the insurable age and earning. Better late than never, is a true proverb to remember.

Life insurance is good for saving. It is good for creating a better future. The advantages of life insurance savings plans are many and so it is worth saving and investing in it. Savings plans in life insurance are always indispensable. It is indispensable for everybody.

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