Key Features Of An Endowment Policy You Must Know About

A life insurance and savings policy, an endowment policy is a hybrid of the two. You can cover your life and save money at the same time with this policy. You will receive a lump payment at the end of the policy's term.

Due to the savings component, endowment policies are more expensive than savings policies, and the regular premiums are greater than pure life insurance policies.

Beneficiaries can collect the insurance money as well as the lump sum accrued amount if the assured dies before the policy's expiration date. If the life assured is still alive at the conclusion of the term, the promised amount, as well as the lump payment, are paid to him.

The former is a unit-linked insurance plan in which the policy is connected to the insurance company's profits and the life assured also receives a portion of the profits.

Key Features Of An Endowment Policy You Must Know About

Below are a few key features of an Endowment Policy you must know about:

• Riders

Riders are optional coverages that can be added to a standard policy. They can provide additional coverage in the event of a severe illness, an accident, or income benefits in the event of the life assured's death, among other things. These options are available for an extra premium price. Riders are sometimes included as a standard component in blueprints.

• Low Risk

Traditional endowment policies have a lower risk of volatility. The extra returns are locked in once they've been announced, and they can't be taken back. A predetermined guaranteed amount, as well as additional allocations, make up death benefits. 

• Tax Benefits

Endowment plans are eligible for income tax exemption under Section 80C if the life insurance provided is equal to or greater than 10 times the annual premium paid. These policies would thus be eligible for tax-free maturity returns under Section 10(10 D) of the Income Tax Act, 1961.

Endowment plans, when used for long-term savings, provide the best returns and security. In most situations, the plans demand a premium to be paid on a yearly basis. Customers who choose these plans should check their ability to pay premiums over time to avoid the policy lapse. Before deciding which policy to buy, analyze your personal needs, income, risk appetite, present life stage, future demands, and so on.

• Eligibility

Endowment insurance can be purchased by minors (future plans for children), with a minimum entry age of 5 years and a maximum entry age of 60 years.

In the event of minors, the policy must be under the supervision of an adult, such as parents or guardians.

• Exclusions

Benefits may not be paid in certain circumstances, such as if the assured commits suicide within a year. The beneficiaries may be able to recover around 80% of the premiums paid in such instances.

• Documents

Identity evidence, proof of address, proof of salary/income, and proof of Pan number are among the documents required. Aadhar card, Pan card, passport, salary/income statement, bank account statement, electricity/gas bill, and pictures are examples of documents that can be used to corroborate such proofs.

• Claim Process

An application must be filed to the firm in order to claim the plan's benefits; following that, the firm will communicate with the assured/beneficiaries on the necessary paperwork. All of these documents should be given to the firm once they have been properly completed. These documents are checked by the firm, and the authorized benefits are released in a timely manner.

Conclusion

Endowment Insurance is one of the world's oldest and most popular types of life insurance. The majority of today's plans are reincarnations of endowment insurance policies with some tweaking, twisting, and addition of features based on perceived market demand. In Western countries, numerous forms of endowment programs are still popular. Traditional endowment policies can be profit-making or non-profit-making, with limited or full-term premium payment options. Nowadays, profit-oriented programs are the most common. 

Also read: 

Why Smart Investors Choose Endowment Policy?

How Does An Endowment Policy Help In Wealth Appriciation?

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.