Are Endowment Plans Risk Free Investment Tools?

A basic product is an endowment policy. The policyholder must select a tenure (e.g., 10 years, 15 years, etc.) and pay an annual premium. The policy offers life insurance coverage for the specified period of time and ensures a lump-sum payout at the conclusion of the term. The lump-sum payment can be utilised to achieve certain financial objectives.Some endowment plans additionally include bonuses, which are amounts added at regular periods to increase the plan's eventual returns.

Endowment plans can be used to cover college tuition, fees, books, living expenses, and other expenditures for your child. If the policyholder dies, the nominee will get the payout as your death benefit and will still be able to pay for education and other expenses.

How Is An Endowment Plan Risk Free?

Following are some key features of endowment plans which make them a risk-free investment choice - 

• Dual Objective- Savings And Life Cover

Endowment plans combine the benefits of saving and insurance into one handy package. Premiums paid at regular intervals help to build a savings account that may be accessed when needed. Endowment plans, as previously stated, provide both savings and insurance coverage.

In addition to the maturity benefit, which pays out the sum promised to the concerned beneficiaries in the case of the policyholder's death, endowment plans offer life insurance coverage. It will assist you in ensuring the safety and well-being of financially dependent family members even when you are not present, making them a long-term savings option that can help you build a safety net.

• Customized Riders For Extra Protection

Riders are supplementary advantages added to the core structure of an endowment insurance plan to make it more appealing to investors. These add-ons boost insurance protection in a variety of scenarios. Various riders are available depending on the insurer, and they may be discussed and changed when the insurance is being purchased.

You can pick from the following riders in an endowment policy:

1. Rider's Accidental Death Benefits
2. Term benefit rider 
3. Accidental Total And Permanent Disability Benefit
4. Rider for Critical Illness Benefits

• Guaranteed Returns On The Plan

Endowment plans provide a greater and risk-free return, whether in the form of maturity or death payments. The premium paid by the policyholder goes into a savings account, which will grow in value over time. An endowment plan's income will benefit both your family and your long-term ambitions.

• Maturity Along With Death Benefits

Endowment plans provide the policyholder with both maturity and death benefits:

• Survivorship Benefits

If the life insured dies within the period of the plan, the business will pay the death benefit to the nominee in the following order:

1. The Sum Assured in the Event of Death, plus
2. Any accrued bonuses at the time of death.

The Death Benefit is capped at 105 percent of all premiums paid up until the date of death (excluding any extra premiums).

The Advantage of Maturity

If you outlast your insurance term, you will get a Maturity Benefit. Maturity Benefit is made of:

i.Amount Assured at Maturity, plus 

ii.Any cumulative reversionary bonuses, plus any earned reversionary bonuses

iii.A bonus at the year's end (if any).

Conclusion

Endowment plans are popular with investors since they are a low-risk investing strategy when compared to peer programmes. They are well-suited to investors that have a low risk tolerance. Guaranteed returns are closely connected to this element of an endowment plan.

The preceding essay will help you grasp the fundamental framework of an endowment plan that makes it a risk free investment option for you.

Also read 

Difference Between Endowment , ULIPs and Term Plans

Which Riders Are Suitable for Endowment Plans?

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.