All About Endowment Policies You Should Be Aware Of

If you are new to the world of life insurance and considering an endowment policy as one of the options, this post is for you. Remember, before making any final decision, it would be a must for you to learn about endowment policy so that you know what to expect. Let’s get started! 

What Is an Endowment Policy?

Endowment plan is a life insurance policy type. This policy type provides a combination of insurance cover as well as a saving plan. One of the key things that make endowment policy an ideal choice to invest in is that it helps one in saving regularly over a specific time period. Doing so, helps the insured get a lump sum amount on policy maturity, in case of survival until the policy term. 

Prime Features of Endowment Policy

Some of the key features of endowment policies are:

• Sum Assured with Bonuses: In case of death of the policyholder, the beneficiary or nominee gets the sum assured along with bonuses. 
• Higher Returns: Endowment policies help one in building a corpus. It must be noted that the survival and death benefit of endowment policies is quite higher than that of a term insurance plan. 
• Low Risk: Endowment policies are associated with low risk as compared to mutual funds or ULIPs as there is no direct investment in equity funds or the stock market.
• Premium Payment Frequency: The policyholder has the flexibility to pay the policy premium payment on monthly, quarterly, half-yearly, and on yearly basis.
• Flexibility in Cover: The policyholder can enhance their cover with riders such as critical illness, total permanent disability, and accidental death to gain more benefits. 
• Tax Benefits: The policyholder gets tax benefits based on Section 80C and Section 10(10D) of the Income Tax Act, 1961.

Benefits of Endowment Policy 

Major benefits of endowment policy are:

• Insurance cover during the policy term.
• Lump sum payout on policy maturity.
• Dual benefit of investment along with insurance cover.
• Low risk investment as compared to other options. 
• Allows long-term savings with policy terms ranging between 10 to 40 years.
• Comes with the option to add riders to extend the coverage.
• Tax exemption on maturity and final payouts.
• Additional bonuses (reversionary & terminal), if provided by the insurer. 

How Does an Endowment Policy Work?

Endowment policies are similar to regular insurance policies. They come with the dual benefit of life cover as well as savings. Once the policy matures, the policyholder gets a lump sum amount due to survival till the end of the policy term. Thereafter, it is up to the policyholder to spend the amount received on various financial requirements like child education, property purchase and more. 

Documents Required to Buy an Endowment Policy?

The list of documents required to purchase an endowment policy include:

• Fully filled application or proposal form
• Photograph
• Age proof
• Address proof/proof of residence

Things You Should Be Aware of Before Buying Endowment Policy 

Here are a few things you must be aware of before buying an endowment policy:

• It would be great if you begin planning early so that you have enough time to build a corpus. 
• It is advisable to select the endowment policies that come with riders so that you get to reap the maximum benefits.  
• You can choose to opt for a regular endowment policy or single payment option or limited premium payment option based on your needs.
• Other than savings and insurance cover, endowment policies offer a combination of guaranteed and non-guaranteed. 
• Insurance companies declare bonuses depending on how the company has performed. 

Also Read: What is the Need For Purchasing an Endowment Policy?

Endowment Policy - Types, Benefits and Riders Explained

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.