Everything About Endowment Plans

An endowment plan is a type of life insurance plan that offers the policyholder dual benefit of insurance coverage as well as savings. This insurance plan helps the policyholder in saving regularly for a specific time period in order to get a lump sum amount towards the maturity of the plan. The policyholder receives the maturity amount if they survive the whole policy tenure.

Types of Endowment Plan

Generally, there are 4 types of endowment plans available in the market. These are:

1. Unit Linked Endowment Plan

Here the insurance premiums are divided into several units held under a particular investment fund which can be selected by the life assured.

Must Read: Endowment Plans Or ULIPs? Which Is A Better Option?

2. Low Cost Endowment

It was designed specifically with an aim to allow the policyholder to gather the funds which have to be paid after a specific time duration, generally mortgage.

3. Full/With Profit Endowment

Under this plan, the sum assured would be offered to the life assured. It is an amount which is guaranteed right from the beginning of the plan. However, the final payout offered is comparatively high based upon the bonus announced by the company every now and then. Once the bonuses get declared, they form a part of the insurance plan and are paid out during the demise of the policyholder or at the time of plan maturity.

4. Non Profit Endowment

This is the type of endowment plan which does not participate in the profits or bonuses generated by the insurance provider. However, to make these plans competitive against other insurance plans, the insurer provides guaranteed additions in such plans, which helps in generating returns for the life assured.

Key Features of Endowment Plans

Some of the salient features of an endowment plan is as follows:

• Death alongside Survival Benefits

  The nominee appointed by the policyholder receives sum assured alongside bonus in the event of untimely death of the policyholder before the plan maturity. And the policyholder is entitled to receive the entire sum assured in case they survive the policy period.

• Premium Payment Frequency

  A policyholder is allowed to make a single, regular or limited payment of the premium depending on the insurance plan opted by them. Life assured can even opt to pay the premium in frequencies on a half-yearly, yearly, monthly or quarterly basis.

• Higher Returns

  An endowment plan not just offers financial safety to the family members of the policyholders in the event of their unforeseen death but also helps in building a financial corpus for their future.

• Flexibility in Cover

  A policyholder is given the option to include riders like total disability, critical illness, accidental death, etc to the insurance policy in order to enhance the life coverage of their basic insurance plan. There are a few insurance plans that offer premium payment waiver in case of critical illness or permanent disability.

• Tax Benefit

  A policyholder is eligible to receive tax exemption on premium payment as well as final death payouts or maturity benefit as per section 80C and section 10(10D) of the Income Tax Act, respectively.

Also Read: What Is Covered Under An Endowment Policy?

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.