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What is Savings Insurance Plan?
Savings insurance plan is a term that may not be general or specific. However, if we understand it in general, savings plan insurance can refer to insurance products designed to help individuals or families achieve long-term financial goals through planned savings habits.
Savings insurance is often a combination of a life insurance policy and an investment instrument. In this scheme, the premium paid by the policy holder is used to provide life insurance cover and part of it is channeled into investment instruments. The purpose of this investment is to generate growth in the value of the investment along with its duration.
In savings insurance plan, policyholders often pay premiums periodically, such as monthly or annually, over a predetermined period of time, usually 15, 20 or 25 years. Funds accumulated from the premium are then used by insurance companies or investment bodies to invest in various financial instruments such as stocks, bonds, REITs, etc.
The purpose of savings plan insurance is to help individuals or families achieve long-term financial goals, such as children’s education, pension preparation, or wealth accumulation. With the combination of life insurance protection and the potential growth of investment value, savings plan insurance can provide double benefits in protecting and growing financial assets.
Next, I will share the pros and cons of this insurance plan.
3 Benefits of Savings Insurance Plan
i) Financial protection
Savings insurance provides financial protection for you and your family. If you as a policy holder or as a ‘bread winner’ experience an unexpected event, such as disability or death, savings plan insurance provides payment benefits that can help replace income or provide financial protection for those left behind.
ii) Investment value growth
Savings plan insurance usually includes an investment component where part of the premium you pay will be invested in financial instruments such as stocks, bonds, etc. This means your fund has the potential to grow over time. Thus, savings plan insurance can help you build long-term wealth and achieve your desired financial goals.
iii) Saving Discipline
With savings plan insurance, you pay premiums periodically, such as monthly or annually. This habit helps create the habit of saving regularly and discipline in your financial accumulation. By making consistent premium payments, you automatically build a portfolio of savings and investments that can provide long-term benefits for you.
3 Disadvantages of Savings Insurance Plan
i) Cost of Fees and Commissions
Savings insurance plan often involves fees and commissions that must be paid. This includes administrative fees, cost of insurance and sales commissions that can reduce the value of your investment. These costs will reduce the growth of your fund and reduce the benefits obtained from this insurance product. It is important to clearly understand the cost structure associated with savings plan insurance before making a decision.
ii) Limited Access and Flexibility
Savings insurance plan generally has a long term and can bind your funds for a certain period. This means you may not be able to access or withdraw funds easily if you surrender before the specified period. In addition, there are certain fees that apply if you decide to terminate the policy before reaching a certain period of time. Therefore, please take note the limited access and flexibility before deciding to buy savings insurance plan as it is a long-term commitment.
iii) Investment returns that are not guaranteed
Savings insurance plan involves an investment component that can grow or decline in value depending on the performance of the chosen investment instrument. Although there is potential for growth in the value of the investment, there is no guarantee that the value of your investment will grow over time. If the investment does not provide the expected results, this can affect the accumulation of funds and achieving your financial goals. It is important to understand the investment risks associated with savings plan insurance and consider your risk profile and financial goals before making a decision.
In short, It is important to consult with a financial professional or insurance agent who can provide more detailed information about the potential pros and cons and other aspects related to savings insurance plan.