A savings policy or saving plan is a financial product that helps fulfil the twin goals of wealth creation and life insurance. In a savings insurance plan, buyers get the dual advantages of making goal-oriented savings and securing their loved ones in times of uncertainty.
 

Saving investment plans are of various categories and often help buyers tick off many life milestones like education, higher education, marriage, home purchase, travel, and so on. It also comes in handy in clearing debts and taking care of financial emergencies like health scares, loss of employment, and so on.
 

Before saving in an insurance savings plan, it is crucial to understand the types of savings plans in India, their benefits, and how each one works.
 

What are the Types of Savings Plans, and How Do They Work?

A savings policy works on a simple principle. First, you pay a specified premium to the insurer offering the savings investment plan. The money you give gets invested in non-market linked instruments and accumulates returns at a pre-specified interest rate.
 

The initial invested money grows and multiplies over a period of years. Once the period passes, you start receiving the accrued income at regular intervals during the income payout period, in a lump sum at the end of the tenure, or a combination of both, monthly payouts and a lump sum.
 

• Monthly savings plan
  
  A monthly savings plan is one of the most popular types of savings plans. Under this plan, you receive guaranteed¹ income every month after a specific period of premium payments. You receive the monthly income during the income period or maturity and can use it for your monthly needs. You also get life insurance coverage so that your family members receive financial support on your demise.
• A guaranteed¹ return savings plan
  
  In a guaranteed¹ return savings plan, you get guaranteed¹ and assured returns during major life stages or milestones. The rest you get at the maturity of the savings plan while also getting a life insurance cover for unforeseen death. A guaranteed¹ return plan has liquidity which means you can encash your money from time to time – something which many investors prefer.
• Money-back savings plan
  
  In a money-back savings plan, you receive the returns generated partially at regular intervals during the subsistence of the savings policy instead of waiting for the maturity period to arrive. The remaining sum assured is given at the expiry of the savings plan. Money-back plans help you fulfil various financial commitments every 2-5 years.
• Endowment savings plan
  
  An endowment savings plan is like any other savings plan. It pays a maturity benefit at the end of the savings plan, , and offers a life insurance cover. However, most endowment plans are profit and non-profit saving plans. In profit endowment policies, you receive any company-earned profits, along with the returns, and in non-profit policies, you only get the accrued returns.
• Unit-linked savings investment plan
  
  This is a subcategory of saving plans. Most saving plans are non-linked, which means the returns accrued are independent of the capital market. This makes them safe to invest in. However, unit-linked insurance plans are linked to the capital market, and their returns are prone to market fluctuations. However, unit-linked savings investment plans generate good returns. You can even balance out the risk by staying invested in it for the long term, as opposed to a short-term savings plan.
   

What are the Benefits of Savings Plans?
 

• Assured maturity benefits
  
  One of the biggest benefits of a savings insurance plan is that it gives policyholders assured and guaranteed¹ returns. Because most savings plans are non-linked, the returns accrued are safe from market ups and downs and are risk-free.
  
  In addition, the interest rate gets fixed at the start of the savings policy, so there is no confusion when the returns and maturity benefit become payable. In some savings plans, you also get bonuses² on the sum assured.
• Flexible returns
  
  The best part about a savings policy is that the returns earned are flexible. You can choose when and how to receive them per your changing life needs. For instance, you can choose to receive the funds during your child’s higher education, marriage, or purchasing a home.
  
  Furthermore, you can select monthly income payouts, regular income payouts, a lump sum payout, or a combination payout option. In addition, the premium payments are flexible – you can choose between monthly, quarterly, half-yearly, and yearly payment options.
• Life insurance cover
  
  What makes a saving plan a hit among buyers is the added comfort of life insurance. Life insurance is an essential tool to secure your loved ones in your absence and help them continue living their lives. In addition, it gives a death benefit that works as a financial reserve through times of crisis.
• Various rider^# options
  
  Savings plans also offer various rider^# additions that provide extra financial support over and above the base maturity and death benefit. Many situations in life aren’t deadly but are life-altering. Riders^# provide additional finances during tough eventualities like accidents, critical illnesses, terminal ailments, job loss, physical disabilities arising from an accident, and the like.
• Tax* benefits
  
  Saving lfe insurance policies also come with several tax* advantages under the relevant sections of the Income Tax* Act of 1961. Under the Act, the premiums you pay towards the savings plan are claimable as tax* returns under section 80C. You can claim up to ₹1,50,000 in a given year. In addition, under section 10(10)D of the Act, the maturity benefit and death benefit you receive under the savings policy are exempt from tax* deductions. These tax* advantages make a savings plan a profitable investment.