Features Of Endowment Plan
Table of Contents
Life Insurance plans are one of the most common investments in India. People invest in insurance plans for safeguarding their families, properties and lives. An endowment life insurance provides investment payout to the assured after a fixed time period or to their beneficiary post-death. One may choose to invest in an endowment plan after understanding its features.
Features of Endowment Plan
It can be difficult to decide whether or not to invest in endowment plans. But, such confusion can be resolved by understanding the following features -
Low-Risk
The money put into an endowment policy is not invested in the stock or equity market. There is a lower risk of losses in such a policy. Hence, the risk of investing in an endowment plan is much less compared to ULIPs or Mutual Funds.
Flexible Cover
There are several additional covers in a policy which are known as riders. These riders can be added to an endowment policy to enhance the benefits including critical illnesses or accidental death. It is required to pay an additional amount upon the base plan to gain such benefits. But endowment plans provide the flexibility to choose which and how many benefits one may add to their base plan.
Maturity Benefit
An insurance investment is for a fixed duration. Once the duration ends, the policy is said to have matured. In the case of an endowment plan, a benefit is received in the form of a bonus at the maturity of the policy. At maturity, the assured sum is received along with the benefit. Such sum assured is also exempt from taxation.
Flexible Payments
An endowment policy or plan allows the assured to invest in any durations they wish. The payment frequency can be decided on the basis of the convenience of the investor. They may choose to pay the premiums on a yearly, half-yearly, monthly, or quarterly basis as they deem fit.
Tax Benefits
The Indian tax laws provide benefits in income tax to the individuals who invest in endowment policies. As per the Income Tax Act 1961, the one investing in an endowment policy is entitled to receive benefits in the form of exemptions upon the maturity, payment of the premiums, and the last pay-out received by them.
Insuring the Beneficiaries
An endowment policy allows two modes in which the final payment may be received once the policy duration lapses. Firstly, once the policy is matured, the assured will get the final amount. Secondly, when the assured dies before the maturity of the policy, the beneficiaries such as the family will receive the amount of the policy. Such an amount may also include certain bonuses.
Savings
An endowment policy does not have to be treated as insurance per se by an individual. Rather, they may even consider it as a mode of savings. An endowment policy provides fixed returns received by the assured at the time of the policy's maturity. Hence, even if an individual does not need a life cover, an endowment policy is a good investment option to save money without risk and receive fixed returns.
High Returns
There are different kinds of life insurance policies such as endowment plans and term plans. The returns in the case of an endowment plan are higher compared to a term plan. Hence, one may insure their family while also saving at high returns. The benefit of pay-out on survival would exist. And if such benefit is not gained, the assured can gain savings at high returns.
Conclusion
It is essential for an investor to understand the features of a policy before investing. One must also read all policy documents for investing safely in an endowment policy. The features discussed above will be helpful in making the right choice.
Also read: Features & Benefits of Buying Endowment Insurance Policy
