How To Purchase A Good Endowment Plan?

When it comes to life insurance, an endowment policy is a great way to go. It's a policy that combines life insurance with long-term savings after a set length of time, making it a hybrid of the two. The maturity period is usually set between 5 and 20 years, after which the policyholder can get the matured amount. The policyholder's nominee receives the money if the policyholder passes away. After the policyholder's death, a traditional term life insurance plan solely benefits the policyholder's nominees.

How To Purchase A Good Endowment Plan?

Here are a few reasons why investing in an Endowment plan is beneficial:

• Two In One Benefit 

You get both life insurance and a savings plan when you buy an endowment policy. You will be guaranteed a particular amount when the insurance matures after the length of time that you specify. The premiums you pay over time will be invested further into other schemes, with bonus amounts from these being added to your credit, resulting in a substantial sum when the time period is up. The policyholder's nominee receives the money if the policyholder dies before the policy matures.

• Tax Benefit 

The fact that the matured amount is a tax-free lump sum is arguably the nicest aspect of purchasing an endowment policy. This is also a tax-free investment, as premiums of less than one lakh rupees are not taxed. The money received in the event of the policyholder's death is likewise tax-free, according to the Income Tax Act.

• Significant Savings 

Many people purchase endowment plans as a way of putting money down for a future event, such as their children's education, marriage, or retirement. As a result, this is an excellent policy for retirement, as policyholders receive a sizable sum of money to help them live comfortably in their later years. Policyholders can also receive loans against the surety of their endowment policies because the monetary returns on such plans are higher. While these factors may lead you to believe that endowment policies are the best option, read between the lines carefully and assess the benefits and drawbacks before purchasing insurance. An endowment policy has a higher premium than a conventional life insurance coverage. If you opt to cancel the endowment plan, you will receive less money than you spent in premiums.

• How To Pick An Endowment Plan?

There are numerous endowment policies on the market now. However, there are various aspects to consider while selecting the best endowment policy. When choosing an endowment policy, examine factors like income, an individual's needs, current life stage, and risk appetite.

When it comes to picking an endowment plan, the cost of the premium is also crucial to consider, as premiums for endowment plans are higher than for other investment plans. Other considerations include the assurer's track record in terms of bonuses, customer service, claim settlement percentage, financial status, and so on.

An investor should get an endowment policy that is straightforward and free of confusing features and benefits.

• Guaranteed And Non-Guaranteed Returns

Many of these policies offer a combination of guaranteed and non-guaranteed coverage, in addition to low-risk insurance and a dual benefit of death protection and savings. Guaranteed returns, such as guaranteed additions, are fixed and payable only upon death or maturity (as applicable). Bonuses that are variable in nature and dependent on investment success are included in non-guaranteed returns.

Conclusion

Your regular payments (monthly or annual) are put to two different uses. A portion of your payments goes toward a life insurance policy, while the rest is invested, usually in stocks and shares. You'll be given bonuses annually, periodically, or at the conclusion of the term if your investments do well.

When your insurance expires (or you die), you'll receive a lump-sum payment based on the performance of your investments. The life insurance component pays money to your beneficiaries if you die early.

Also Read: 

How To Buy the Right Endowment Plan?

Benefits Of An Endowment Policy Which Makes It A Must Have

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.