Does Buying Endowment Involve High-risk?
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An endowment plan is a life insurance policy that pays a lump sum to the policyholder at the end of its term or to a nominee in the event of the policyholder’s death. While it pushes you to save for the future in the form of premium payments today, it offers life cover and results in a corpus or fixed income upon maturity of the policy.
Why To Opt For An Endowment Plan?
Endowment policies offer some key advantages to policyholders. Here’s why you should opt for one:
- Multiple benefits: Endowment plans are a combination of savings and insurance. Such plans let you save for the future and provide guaranteed payments and cover against emergencies.
- Low risk: Endowment plans are low risk and secure. They are ideal for those looking for a safe investment avenue and wish to avoid investment in higher-risk equity-oriented options.
- Systematic savings: Also called planned savings plans, endowment plans require a stipulated amount to be paid as premium at regular intervals. The process helps save in a disciplined and systematic manner for a future corpus and build wealth for key life events that impact finances, such as marriage, education, retirement, etc.
- Financial security: If you are the sole earner in your family, preparing for unforeseen emergencies like accidents and illnesses is a must. In the case of untimely demise, endowment plans offer financial security to the family through death benefit as a lump sum or regular income. This can help your family pay off liabilities if any. Alternatively, the policyholder receives the lump sum/income upon maturity of the plan’s term.
- Tax benefits: A major advantage of endowment plans is the dual tax benefit, wherein deductions can be claimed under both Section 80C (on premium paid) and Section 10D (on death benefit) of the Income Tax Act.
Conclusion
Endowment plans come with various benefits, depending on the policy you choose. Many plans have assured bonuses, which are a particular percentage of the sum assured. These bonuses accrue over the policy period and are paid along with the sum assured to the policyholder (in case of survival) or nominee (in the event of policyholder’s death).
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