All You Need To Know About Endowment Policy

Endowment insurance plans are designed to provide life cover along with the benefits of a saving plan. This plan enables individuals to save regularly for a specific period to generate a significant corpus which they can enjoy at maturity. In case of demise, the nominee of the policyholder will be entitled to get the sum assured from the insurance company. While if the policyholder survives during the policy term, he or she will be eligible to receive the sum assured and bonus for the term of the policy. An endowment policy is a great facility to help you meet your financial goals which may comprise a kid's education, child’s marriage, buying a house or planning your retirement.

Types of Endowment Plans

Endowment plans are one of the best investment instruments that can help you achieve your milestones. It is crucial to consider different types of endowment policies before purchasing them. Below are different types of endowment plans which you can opt for based on your financial requirements:

1. Unit Linked Endowment Plan

Under the unit-linked endowment plans, the premium amount is divided into two parts where the one is used to buy units in various investment funds based on your preference while the other part is used for your life insurance cover. It is considered the best plan in which people want to invest.

2. Guaranteed Endowment Plan

This plan offers guaranteed benefits to policyholders. Under this plan, the policyholders get the sum assured amount along with loyalty additions on maturity. Besides, with the guaranteed savings plan, if the policyholder survives the policy term, he or she will be entitled to receive a guaranteed sum assured on maturity, guaranteed yearly additions, and guaranteed loyalty addition.

3. Profit Endowment Plan

This policy provides policyholders with a sum assured amount as promised during the time of policy purchase. However, based on whether the insurer declares a bonus or not, the final payout added with the surplus amount can be higher upon the death of the insured person or policy maturity. 

4. Low-Cost Endowment Plan

This policy is designed to provide assistance to policyholders for generating a corpus to secure their lives or to settle their loans, etc. In case of the policyholder’s death during the policy term, the claimants or beneficiaries will be eligible to get the complete sum assured.

5. Non-Profit Endowment Plan

This type of endowment plan provides guaranteed additions rather than bonuses as they don’t contribute to the profits of the insurance company. Such plans help in generating returns for the policyholder and make them attractive in comparison to other schemes in the market.

Features and Benefits of Endowment Plans 

Endowment plans help you save a good amount of money to achieve different types of goals in life. Here are some benefits of having an endowment plan which you should be aware of:

1. Higher Return on Investment

An endowment plan helps people build their wealth to achieve their financial goals. Its benefits are payable to policyholders upon survival, while in case of policyholder’s death it is given to nominees. However, these returns are higher than that of a pure life insurance plan.

2. Premium Payment

The policyholders are given options to pay for their insurance premiums in installments such as on a monthly, half-yearly, or quarterly basis. The premium frequency is decided based on your preference, provided you will have to ensure that premiums are paid by you on time.

3. Flexibility to Choose Cover

Policyholders are allowed to select from additional or optional coverage to get protection against critical illness, partial or permanent disability, accidental death, and so on. A few more plans are available that promise to waive the premium in the case of policyholders suffering from such conditions.

4. Benefits on Both Survival and Death

The policyholders get the policy benefits in both the situations of death and survival. They receive the complete amount of sum assured upon survival during the policy term, while their nominee gets the sum assured in addition to the declared bonus in case of the policyholder’s death. 

5. Tax Exemption

You can save your tax on the amount of premium you have paid for the endowment plans according to the provisions of section 80C. The maturity amount comprising the final payout is also eligible for tax exemption under section 10(10D) of the Income Tax Act.

6. Risk Factor

When compared to mutual funds, where your money is invested directly in stock markets by the experts and carries higher risk, the endowment plans are designed to grow your money with a negligible amount of risk, which is the best part for policyholders.

Also Read: How Do Endowment Plans Work and Do They Generate Returns?

Who Should Purchase an Endowment Plan?

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.