All There is to Know About Endowment Policies

Having robust savings in times of need or retirement is certainly a desirable goal for many. Having good savings helps one to cover expenses such as higher education for children, marriage or urgent medical bills. Hence, it becomes increasingly important to make smart financial decisions to ensure a good return on your investment. That said, there are various financial products available in the market that allow investors to leverage investment options that best suit their needs.

That said, opting for investment is certainly to be done keeping in mind a long-term investment horizon. Hence it becomes increasingly important to take into consideration factors like future income, ability to take risks, and financial goals to be met, to name a few. Opting for plans that need recurring payments also helps ensure customers practice financial discipline.  Products like Endowment policies are certainly gaining in popularity as they enable investors to achieve their financial goals. 

First off, What Exactly is an Endowment Policy?  

An endowment policy is a financial product that allows its investors to enjoy the dual benefit of both an insurance cover as well as enjoy the benefits of long-term saving. The need for policyholders to opt for a plan of this type is if they intend to save money for future goals.

The key offerings of an endowment plan are namely- 

• Benefit during death: with the sum assured amount being decided based on the premiums being paid, during the event of the untimely death of the policyholder, the beneficiaries receive the sum assured with bonuses if any. 
• Benefits on survival: In the event, the policy holder outlives the tenure of the policy, they become entitled to receive an assured sum along with the bonus, if any

Key Features of an Endowment Plan

Before opting for an investment, it is always crucial to know the features of the product. Features that make endowment policies worth considering include the following-

1. Death & survival benefits

Endowment plans have a sum assured component. In case policyholders outlive the tenure of the policy, the policyholder is entitled to the agreed-upon sum assured amount along with a bonus in the form of maturity benefits. Conversely, in case of the untimely death of the policyholder, the beneficiaries mentioned in the policy get the sum assured amount. 

2. Flexibility in the frequency of premium payment

The payment plans made available by endowment policies allow policyholders the flexibility of choosing the frequency of payment of the agreed-upon premium amount. Investors may choose between yearly, bi-annually, quarterly or even monthly.

3. Riders may be added

Similar to add-ons for insurance policies, endowment policies have riders that may be added by the policyholder to cover specific events such as critical illnesses, permanent disability, and so on. 

This allows for policyholders to customize their policies to meet specific needs.

4. Tax Benefit Provided

A policyholder may enjoy tax benefits on the premium paid. Since endowment policies allow for tax benefits. That said, the maturity amount both in case of death and maturity is also eligible for tax benefits.

Who should opt for an endowment policy?

Investment products are tailored to meet the needs of specific customers, however, it becomes important to opt for the product that is best suited to your needs. However, factors like savings, the need for liquidity at different stages of life and financial goals do come into the picture. In the case of an Endowment policy, one may opt for this if they have the following needs-

In case customers have a specific need for a lumpsum amount at a future date, the sum assured amount of the endowments policy becomes key. This helps when customers are looking for an assured amount provided at the end of the policy tenure.

Insurance cover along with a life insurance cover for the policyholder. Additionally, the benefits are handed out to the beneficiaries in case of the death of the policyholder.

Key Takeaways

With investors looking for various opportunities to ensure a comfortable financial cushion for their future, investing in the right tools and making smart financial decisions have become increasingly important. Policies like endowment policies not only ensure policyholders maintain discipline when it comes to investing but also provide the benefit of guaranteed returns, life cover and death benefits to name a few. 

Hence, for investors looking for a lumpsum amount to meet their future capital needs, an endowment policy is certainly worth considering. Not to mention various riders that can be added on top of the base policy to better help customize the product to your specific needs.

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