Do Endowment Policies Come With Tax Benefits?

Endowment plans are insurance policies that pay out a total sum assured plus different incentives to the policyholder or to the policyholder's nominees at the end of the plan's term or if the insured dies prior to actually the end of the period. Endowment plans are essentially insurance products that also serve as a savings vehicle for the investor. The plan's main features include a lump-sum payment to the policyholder's nominee(s) in the case of the policyholder's death during the policy term, as well as the ability to receive maturity awards if the life assured lives to the conclusion of the policy term.

Endowment agreements employ the terms "with-profit" and "without-profit." In a profit-oriented endowment plan, reversionary and terminal bonuses are added to the principal sum promised at plan maturity, giving extra fund advantages. A non-profit endowment plan, on the other hand, has no such benefits and is comparable to normal life insurance. An endowment plan has the advantage of providing lump-sum payouts. This feature includes the maturity proceeds as well as the primary plan advantages, such as the sum assured.

This means that at the end of the term, the policyholder will get a lump-sum payment and will be allowed to invest the assets as needed. Because the policy duration is not governed by any strict or pre-determined criteria, an endowment plan can be purchased depending on the investor's unique needs and financial goals.

Do Endowment Policies Come With Tax Benefits?

Here are a few benefits of Endowment plans:

• Benefit From Taxes

Sections 80C and 10D of the Income Tax Act of 1961 exempt the payable premiums as well as the principal plan benefits (sum assured and maturity proceeds), hence an endowment plan provides tax advantages.

• Payment Of Premiums On A Regular Basis

Endowment plan assurers, on the whole, provide premium payment options that are relatively flexible. This means that the policyholder can pay the premium whenever it is convenient for them. All options are available, including monthly, bi-annually, annually, or as a one-time lump sum payment.

• The Adaptability Of The Cover

Endowment plans offer a wide range of coverage options, including partial/total disability riders, critical illness riders, accidental death riders, and more. This affects the premiums that must be paid, but it also expands the scope of coverage.

• Death, As Well As Survival, Have Advantages

Endowment plans are unique in that they guarantee payment of benefits to the policyholder if she or he survives the period of the plan, as well as entitle her/nominee(s) to the sum assured plus numerous additional incentives if the policyholder dies during the term of the plan. As a result, both death and policy survivor benefits can be provided under an endowment plan.

• A Rise In Profits

Endowment plans have higher overall returns than traditional life or term insurance plans due to the additional advantages. Because additional payment amounts are blended with the regular sum assured, the plan's advantages are greater.

Conclusion

Robust endowment insurance provides us with the stability and tax-free1 returns we need to meet future emergencies while also allowing us to realize our non-negotiable life goals, such as paying for our children's education, marriage, or living a self-sufficient retirement. Your loved ones will receive the money you earmarked for them immediately if you die within the policy's term. As a result, an endowment plan financially protects you and your family.

Also read: 

Benefits of Buying an Endowment plan

Mutual Funds V/S Endowment Plans- Which one is Ideal for me?

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.