How Do Savings Insurance Plans Help with Inflation?


One of the essential aspects of financial planning is savings through comprehensive plans such as savings insurance plans. These life insurance plans allow setting aside a sum of money for ourselves to help us achieve our long-term goals in the future, along with offering life cover to secure our loved ones. However, due to the corrosive nature of inflation, the value of our savings may decline over the years. 

Then, how do we protect our savings? For that, let’s understand inflation first. 

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What is Inflation?

Inflation is the hike in the cost of goods and services, which results in a decrease in the purchasing power of money. If you wish to understand the influence of inflation in your life, compare the present and past costs of different products and services you have purchased over the years. 

How does inflation affect your investments and savings?

Every increase in the prices will affect your cost of living, which will consequently leave a dent in your investments and savings. This is because, with a rise in inflation, the amount you save or invest through your income every month may not increase at the same rate. Therefore, the price rise will put extra pressure on your investments and savings. After a few years, your saved amount may get you lesser goods due to inflation. 

For instance, if you have ₹1000 in your savings account, and let’s say the interest you earn on it is 5%. Therefore, after a year’s time, you will have ₹1050 in your account. Let’s say the inflation in that year was 10%. If the price of a commodity were ₹1000, it would rise to INR 1100 in the mentioned year. 

So, even if your savings amount grows by 5%, the commodity price will grow by 10%. This will lead to a negative returns rate, or we can say that you will have to pay out more than what you have with you. Therefore, inflation will reduce your purchasing power and will eat into your real returns on savings. However, there are certain ways you can rely on to save your savings from the corrosive nature of inflation. 

How can you protect yourself from inflation?

If you wish to protect yourself from inflation, you must invest in financial products that provide you with a higher return rate than the inflation rate. You can rely on certain investment options like mutual funds, bonds, property, gold, stocks, savings plans, etc. These investments will grow your savings and provide you with a hedge against inflation. Among these options, selecting an assured savings insurance plan for yourself can be quite optimal for you in the long run. 

What is a savings insurance plan?

A savings plan is essentially an insurance plan that provides individuals with the ability to get insurance coverage and build wealth. As they are insurance plans, the premiums paid towards them are eligible for tax deductions. With these tax-saving investment options, the premiums paid by the policyholder are split into two parts. The first part is held for insurance coverage, and the other part is invested in multiple low-risk or zero-risk investments. How do savings plans help you with inflation?

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How do savings plans protect you from inflation?

Life insurance savings plans invest in zero-risk investment avenues that are not related to market volatilities. Along with this, these tax savings options in India also provide you with the exact rate of returns. As per research, long-term savings investments have generally outperformed inflation. Therefore, if you opt for a long-term investment through your savings plans, your funds will be held in the medium return avenues for a long tenure. Holding funds for the long-term will help you build a large corpus over the years. This can be credited to the power of compounding. 


Hence, when you begin planning your finances, one of the most crucial aspects you must keep in mind is inflation. Inflation may eat into your savings and may erode all the hard work you’ve done over the years. However, you can opt for many instruments that protect you from inflation and ensure your savings aren’t affected. Out of these instruments, an assured savings insurance plan is one of the most optimal ways you can protect yourself and achieve your long-term goals.