5 Myths About Saving Plans

As the primary breadwinner, your family’s financial goals and safety are your first concern. You would want to ensure that your family can achieve their goals, like a child’s higher education and marriage in your absence.

You have the option of investing in multiple savings plans from life insurers to fulfil both the investment and safety needs of your family. To use these savings plans effectively, you need to have the correct information about them.

However, there are many popular myths about life insurance saving plans which may stop you from maximising your benefits from them. Before we burst out your myths, let’s understand what a savings plan is and how it is beneficial for you.

Saving plans are structured financial products offered by insurers that help you build a corpus systematically over time. These plans combine disciplined saving with long-term financial planning and often include insurance coverage as well. They are ideal for individuals who want to secure their future needs, such as children’s education, marriage expenses, or retirement,  without compromising on present commitments.

You can choose a savings plan based on your life goals, income level, and risk appetite. Most plans offer guaranteed maturity benefits, flexible premium payment options, and tax benefits under current income tax laws. By investing regularly, you create a habit of saving and gradually build wealth for your future.

Key Benefits of Saving Plans

Saving plans offer a range of benefits that make them a preferred choice for long-term financial planning. They offer disciplined savings and wealth creation, and also serve as a safety net for your family. Let’s explore some of the key benefits below.

• Financial Discipline: Saving plans encourage regular investment, helping you develop a disciplined saving habit. This consistency ensures that you are gradually building a corpus over time, even if the amounts invested are small.
• Long-Term Wealth Creation: These plans enable you to accumulate wealth over the long term. The power of compounding plays a crucial role in enhancing returns, especially when you start early and stay invested over a longer tenure.
• Insurance Protection: Many savings plans come bundled with life cover. In the event of an untimely death, your loved ones receive a lump sum amount to keep their future financially secure.
• Tax Benefits: Saving plans offer tax deductions under Section 80C and Section 10(10D) of the Income Tax Act. Contributions made towards these plans can reduce your taxable income, while the maturity amount may also be tax-free under prevailing laws.
• Goal-Based Saving: Saving plans help you align your investments with milestones such as child education, buying a house or a marriage. You can select a plan that matures when you need the funds, ensuring that your goals are not compromised.
• Liquidity in Emergencies: Some savings plans offer partial withdrawal or loan facilities after a specific lock-in period. This liquidity can be helpful during medical emergencies or unforeseen financial needs.

Common Misconceptions About Saving Plans 

Despite the popularity of savings plans, many people hold onto outdated or incorrect beliefs about how these plans work. These myths can prevent you from making informed financial decisions or taking advantage of valuable benefits. Let’s break down some of the most common misconceptions and understand the real value that saving plans can offer.

Myth #1: Saving Plans do not Provide Sufficient Life Cover:

Savings plans are designed to provide a safe way to achieve your financial goals. So, when you use a savings plan to achieve your financial goal, the plan protects the goal adequately. For example, you aim to build a corpus of ₹ 40 lakhs for your child’s higher education goal. If you use a savings plan to invest in it, it may offer the following:

• Help you accumulate ₹ 40 lakhs with regular contributions

• Keep your corpus safe from market volatility

• Protect your child’s goal from the risk of your early demise

These benefits mean that your child has the assurance of achieving the level of higher education you have planned for her, even when you cannot be there.

Myth #2: Saving Plans are only Tax-Saving Tools:

Tax-saving could be a popular reason for investors’ choice, but tax-saving is one of the many benefits life insurance offers, and not the primary benefit.

Also, any savings plans meant to only save tax would perhaps not offer you substantial other benefits, such as:

• Life cover

• Guaranteed Bonus additions

• Wealth boosters

• Options to invest in different asset classes

• Automated portfolio management option

You can receive one or more of these benefits depending on the savings plan you choose. For instance, if you stay invested long enough, the plan will also offer a bonus to boost your portfolio.

As a matter of fact, the best savings plans help you achieve your financial goal and at the same time increase the protective umbrella of life cover for your family.

Myth #3:  Saving Plans are Expensive to Invest in:

Saving plans, especially online savings plans, are almost inexpensive. First, to start investing, you don’t have to be earning millions and have a great savings ratio. Even if you are on your first payroll, getting about ₹20,000 and have a savings ratio of 10%, you can start with a savings plan.

Myth #4: Saving Plans are for Wealthy Investors:

This statement is far from the truth. Given the fact that most savings plans are safe investments, it makes more sense to use them when your risk appetite is low. This may happen in the following cases:

• Your income and earning potential are low

• You want to preserve your wealth for a specific purpose

In other words, when you have wealth, you will need savings plans to preserve wealth. Whereas, before you are wealthy, you need to use savings plans for building that wealth. 

Myth #5: Saving Plans Offer No or Little Benefits

If nothing else, savings plans will still offer the following two benefits:

1. Added financial protection for your family in case of your early death
2. A safe option to invest in your family’s future goals

You can consider the Promise4Growth Plus ULIP from Canara HSBC Life as a flexible long-term plan that blends market-linked investment with life insurance protection. It not only helps grow your wealth but also safeguards your family’s financial future.

How it Works: Your premium is invested in market-linked funds to grow your wealth, while also offering life insurance to protect your family financially.

• Multiple Investment Strategies: Choose from 12 fund options and 4 smart strategies (like auto-rebalancing and return protector) to manage your money as per your risk appetite.
  

• Guaranteed Additions & Loyalty Boosters: Enjoy loyalty additions every 5 years, wealth boosters after 10 years, and a refund of all mortality charges at maturity, boosting your returns.
  

• Flexibility & Partial Withdrawals: You can make partial withdrawals after 5 years, reduce premium payments later, and switch funds anytime without any charge.

• Tax Benefits Under Sections 80C & 10(10D): Premiums qualify for tax deductions under Section 80C, and returns/death benefits may be tax-free under Section 10(10D), as per current tax laws.

The Truth: Myths Hold You Back:

Myths, or misinformation about investments, can restrain your financial well-being and keep your family vulnerable. Thus, it’s better to discover the truth than to believe in hearsay and opinions.

Investments are tools; if you use them right, you can achieve much more than your investment goals and keep your family’s future safe as well.

Final Thoughts

Saving plans are much more than just insurance policies; they combine protection and investment to cater to diverse income levels and financial aspirations. Don’t let misconceptions hold you back from making informed decisions.

Take the time to explore your options, understand each plan’s benefits, and choose one that suits your life stage, goals, and risk appetite. When chosen wisely, a savings plan becomes more than an investment; it’s a promise to safeguard your family’s future and support their dreams.

With Canara HSBC Life Insurance, you have access to a range of innovative savings and investment solutions that blend long-term growth potential with dependable protection.