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How Can your Insurance Policy function as a Savings Tool

An insurance policy is undoubtedly one of the best and most critical financial decisions you will ever make. Not only does a comprehensive insurance plan protect, care for and safeguard your future and that of your loved ones, it is also a great savings tool.

Here is how your insurance policy can function as a savings tool:

Assurance of funds:

A guaranteed savings life insurance policy is a non-market- linked product. In such plans, you pay a fixed premium according to the sum assured, and you get a definite, pre-decided return. This ultimately provides security to your savings, unlike market-linked investment options like mutual funds, equity, etc. which offer high returns but at a higher risk. Whereas, if you are a careful planner, you can securely invest your hard-earned money into a guaranteed savings life insurance plan, and be sure of the safety of your savings.


A safety net for the family: 

The most important factor that fuels the growth of insurance in India is the safety net it provides for the family, especially in the absence of the policyholder. Hence, life insurance savings offer you the much-needed peace of mind that your family is financially secure, irrespective of how turbulent times are in the future. The insurance money can be used to pay rent, electricity bills, child’s education, child’s marriage, etc., in your absence. 


Guaranteed payouts: 

Comprehensive life insurance plans like the Aviva New Wealth Builder offer assurance of savings, along with guaranteed payouts in case of uncertainties, provided all due premiums are paid. Such life insurance plans provide you definite benefits on the death of the policyholder or the maturity of the policy, in case of survival of the policyholder.  Moreover, for the young savers, the payouts become even more advantageous. You can use the lump sum benefit to purchase the car of your dreams, to travel to your dream destination, or even to fund your business idea. 



The most significant advantage of using a life insurance policy as a savings tool is tax saving. Taxes can be burdening and also reduce your savings by a considerable amount. However, if you choose to invest in an insurance policy, you can enjoy tax aids, without compromising on your savings. According to the Income Tax Act, 1961, life insurance plans offer dual tax benefits:

i) The premiums paid for the policy are eligible for tax exemption under Section 80C* up to Rs. 1.5 lakhs. Hence, you can set more money aside by lowering your overall tax outgo.

ii) The maturity benefit offered by insurance plans is completely tax-free. This advantage can be availed under Section 10(10D)* of the Income Tax Act. However, for this benefit, your total premiums should not be more than 10% of your annual Sum Assured.

You can also claim the above advantages for any add-ons and riders like accidental death benefit and waiver of premiums. Life insurance plans like Aviva New Wealth Builder, offer an Accidental Death Benefit add-on, which provides an additional tax-free* payout of a sum up to Rs. 30 lacs per life, in case of the policyholder expires due to an accident. 

*Tax laws are subject to change.


Disciplined savings: 

Given the rising cost of living, you must inculcate the habit of saving right from a young age. It is critical to save consistently, irrespective of how little the amount is. And a life insurance policy is a great enabler in promoting the habit of saving. A major advantage is that holistic plans like Aviva New Wealth Builder, allow you to decide your premium payment frequency –monthly, half-yearly or yearly, to suit your financial conditions. 


Foundation of long-term plans and dreams: 

A life insurance policy not only safeguards the financial needs of your loved ones in your absence but also allows you to save smartly to lay the foundations of your long-term plans. During retirement, when you will not have an income stream to rely on and support your standard of living, the maturity payout from a plan like Aviva New Wealth Builder can come to the rescue.


Coverage against financial liabilities:  

You may have borrowed funds, taken bank loans, mortgages, etc. to support your aspirations. Even though you might be able to pay a part of your debt obligations now, your family will be heavily burdened, in case of your unfortunate demise. The sudden loss of income, mounting debt and loss of a loved one, will become too much to deal with for loved ones. In such times, a life insurance policy ensures that your family has the financial means to discharge all debt or mortgage obligations, even in your absence. 


Smart decisions of the present can lay strong foundations for the future, and help you and your family withstand even the most difficult times. Trust the Aviva New Wealth Builder life insurance plan to provide you with a holistic insurance cover, guaranteed payouts at maturity on survival and death and a strong shield against all uncertainties. 

Be wise, secure your future!



AN Nov 55/20

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