Key Benefits Of Buying An Endowment Policy

An insurance firm provides endowment plans. These have both a life and an insurance component. They make an impossible-to-resist combo that people love. While the returns on a ULIP plan are market-linked and are dependent on how the stock market performs, the return on an endowment plan is predetermined, and the amount received upon plan maturity is known from the first day. This plan is also tax-free, and the investment component generates a yearly bonus from the firms that are alleged "far more" than the guaranteed return. A life insurance policy with an endowment is a combination of investment and insurance. This plan combines the best of both worlds: the policyholder receives the full sum assured at maturity, and the policyholder's family receives a benefit in the event of the policyholder's death. Endowment plans follow a comprehensive approach to saving that can be useful in the event of a financial crunch. 

Money-Back plans are a type of Endowment plan in which you have reimbursed a portion of the benefits at regular periods throughout the policy term. The insurance coverage provided by these plans is typically inadequate for the policyholder's dependents, but they can be valuable investment vehicles. There is a sense of discipline, and you continue to pay on time, building a corpus that can be utilized for a large cash need at the conclusion of the policy term, such as your child's higher education, marriage, or home purchase.

Key Benefits Of Buying An Endowment Policy

Below are the key benefits of buying an Endowment Policy:

1. Guaranteed Benefits

Traditional endowment policyholders who purchase a 'With Profit' option are entitled to a share of the profits/dividends declared by the insurance firm as a bonus or guaranteed. Depending on the company's investment and return expectations, as well as its bonus distribution policies, the bonus amount may fluctuate. Because returns are contingent on market or fund performance, there are no guarantees with ULIPs. Few assurers, however, may add Loyalty Units to the fund in the years leading up to maturity.

2. Surrender Benefit

In times of financial hardship, endowment policies can be surrendered according to the policy's conditions after a 3- to 5-year lock-in period. However, the surrender value is determined after certain surrender charges have been applied, which vary per assurer.

3. Loan Benefit

Endowment policies allow you to borrow money against the policy. To qualify for a loan, you must meet certain requirements, such as paying premiums for a minimum of three years. The plan's lending feature enables you to meet your family's financial demands and meet an immediate cash necessity.

4. Insurance Benefit

An endowment plan provides insurance benefits to the nominee by providing a life cover or sum assured in the case of the life assured's death within the policy term. It provides financial security for your dependents in the event of a disaster.

5. Maturity Benefit

If you invest in an endowment plan, you can get a lump sum payment plus a cumulative bonus or the fund value at the policy's maturity, as long as you pay all of the required premiums. The maturity amount also aids in your financial advantage.

Conclusion

Fixed deposits are typically marketed as endowment packages. Whenever a part of your premiums is being used to purchase insurance protection or you surrender the policy prematurely, you would not get returned what you paid in. If you do not need insurance coverage, think again about buying an endowment product to develop your assets. Compare the product's returns, features, and risks against those of other available investment options. Those who only want life insurance and don't want to save money should opt for a term plan. This is because term plans are both cheaper and easier to understand than endowment plans, as they provide more coverage for lower premiums.

Also read - What Is An Endowment Policy? What Are Key Benefits Of 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.