Know Why Buying An Endowment Policy Is A Good Idea

An endowment policy is a type of life insurance that not only covers life of the policyholder, but also helps the insured to collect a corpus amount that may be availed of at the time of maturity of the policy. The accumulated amount may be used to meet various personal financial goals of the insured.

The policyholder gets his/her sum assured on a fixed date in future as per the terms and conditions of the plan. However, in case of sudden death of the policy holder, the insurance company will pay the sum assured (including the bonus, if any) to the nominee of the policy. Besides, it is also useful for securing yourself and your family post-retirement or to meet various financial needs such as funding for children's education or marriage or buying a house.

Benefits Of an Endowment Plan

Before opting for an endowment policy, it is essential to understand the various benefits it has to offer.
 
Following are five major advantages of a whole life insurance policy-

1. Provides Life Cover

Life is unpredictable. In case of any unfortunate event of death of the policyholder, the family may be financially burdened. An endowment policy pays the sum assured to the loved ones in case of any such unfortunate event during the policy term. This amount acts as an income replacement if the policyholder was the sole bread earner of the family.

2. Offers A Disciplined Route For Savings

Premiums towards the endowment policy need to be paid either monthly, quarterly, half-yearly or annually, according to the terms and conditions of the policy document. This inculcates a habit of saving regularly in you. You pay your premiums on time to ensure that you get a lump sum at the time of maturity of the policy, which may, in turn, be used during any financial emergency.

3. Provides Bonus

An endowment plan also offers an annual bonus. This amount is then given out as a percentage of the sum assured. In case of death of the policyholder during the policy period, the nominee is entitled to receive the sum assured along with the total bonus accumulated. Alternatively, upon survival at maturity, the policyholder may even enjoy both the sum assured and the additional bonuses accrued during the policy period.

You May Also Like To Read:- Endowment Plans Vs. Term Insurance Plans 

4. Helps To Meet Various Life Goals

Since endowment policies offer the accumulated amount once the term matures, you may use the amount to meet your personal long-term goals. Besides keeping it as a safety net to meet your expenses during your golden years, these may include children's higher education, down payment towards a new house, or buying a new car.

5. Tax Benefits

One of the best reasons to invest in an endowment plan is to reduce your tax liability. You may also enjoy tax benefit on the premiums paid towards your policy, under Section 80C of the Income Tax Act, 1961. Besides, the death benefit amount is exempt from tax under Section 10D.

Also Read:- Reasons To Purchase An Endowment Plan

Conclusion 

Although endowment policies are excellent investment instruments that offer financial security for the present and also for the future, they are costlier than term policies. Term policies offer you a larger cover at a lesser price. In case of death of the policyholder, the family members of the insured may get the sum assured, but at the time of maturity, term plans do not give any amount to the policyholder.

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.