Calculate Returns on Endowment Plans: Know Bonuses & Plans

In India, endowment life insurance policies are known for being a smart investment option. These plans give you the benefit of both risk coverage in the form of life insurance and wealth accumulation from investments. Hence, they are a great option for people who want to protect their future and also have a chance at growing their money. 

In this article, we will explore the advantages, how to calculate the costs, and the different plans available for endowment life insurance policies. 

What Are Endowment Plans?

An Endowment Plan is a life insurance policy that combines saving and insurance-meaning; you can save for a certain period while being insured. These plans work by asking you to pay regular premiums which the insurer invests in safe instruments. The sum assured, along with any bonuses earned during the policy period, is paid out at maturity if the insured survives the duration of policy. In the sad event of the policyholder's demise, the nominee gets the death benefits.

Endowment plans suit those who have certain financial goals in mind, such as childhood education, retirement planning or a goal to buy a house. For individuals averse to risk, disciplined saving combined with protection cover from life insurance makes endowment plans a good choice. These plans do not involve direct exposure to the equity market so it’s a steady growth model for conservative investors.

The payouts on endowment plans can be used to meet various financial goals especially those that require large amounts of funds at a future date. Choose the right premium and policy term and you can save and also protect your family in case of unexpected events.

What Is An Endowment Calculator?

An endowment calculator is a tool that helps you pick the right insurance and plan your investments better. It encourages you to save regularly for future long-term and family goals like having children or getting married. With the cost of living rising, just saving money regularly is not enough to make your money grow.

An endowment calculator shows you how much money you can accumulate over time by considering your initial investments, expected interest rates, additional investments, and how often you make these investments. By investing for the long term, you can build your wealth and enjoy a worry-free life. It calculates your earnings by considering the sum assured, any bonuses, and the total amount you have paid in premium.

Calculating Endowment Returns Using An Endowment Calculator

The Endowment Returns Calculator helps you understand how much money you can make each year. It uses the concepts of compound interest and inflation. You just need to input your initial investment amount, the interest rate you are expecting, how much you plan to invest over time, and how often you will make these additional investments. With this information, the calculator will predict your long-term earnings from these investments. It calculates your returns by considering the guaranteed amount, any extra bonuses, and the total amount you have paid.

Types of Bonuses in Endowment Plans

Endowment policies are something that carries a bonus as the value of the policy increases over the term. Insurers declare these bonuses every year based on their profits and it helps to increase the final payout to the policyholder or his nominee. Here are the types of bonuses in endowment policies:

1. Simple Reversionary Bonus

The Simple Reversionary Bonus is the most common type credited by insurers to endowment policyholders. Once declared, it becomes part of the policy’s guaranteed sum. The bonus rate is based on the insurer’s performance, providing consistent growth for policyholders. These bonuses are added up and they at last lead to a higher maturity payout which makes long-term policies good for using them.

2. Compound Reversionary Bonus

A Compound Reversionary Bonus works like the simple, except that it compounds. The bonus for each year is added to the previous year's total, it creates a compounding effect. This is beneficial for those who hold policies for long term as the policy value grows faster over time and provides higher maturity benefits

3. Terminal Bonus

It is a one-time bonus which is paid at the end of policy term or on the occasion of a claim.

Also known as a “loyalty bonus,” it rewards policyholders who retain their policies until maturity. However, this bonus is not guaranteed and is typically declared based on the insurer's profits during the final years of the policy.

4. Interim Bonus

This type of bonus applies if a claim arises between two policy anniversaries. It ensures the policyholder or nominee does not miss out on bonuses during this interim period. Although not guaranteed the interim bonus adds to the policy value and covers the gap between the last declared bonus and the claim date.

These bonuses increase the endowment policy’s overall value making it a good option for those who want security and steady growth.

Features of Endowment Policy

• Dual Benefits: Endowment gives you both financial growth and life insurance. If something terrible happens to you, life insurance will protect your family financially. Along with life insurance, you will get a lump sum payment when the policy ends, which can help your savings and give you extra money. It is a smart and cheap way to save money for the future and protect your family from the problems that life may bring.
  
• Financial Goals: An endowment plan can help you save money and build your wealth over time. Putting money into an endowment plan on a regular basis can help your finances, letting you save for big purchases or even vacations.
  
• Independence: You can pick a plan that best fits your budget and way of life.  Endowment plans give you a lot of options when it comes to the length of the plan and the amount of the premium.
  
• Relief from Taxes: Endowment plans also offer tax advantages.  According to Income Tax laws that are changed from time to time, the premiums paid for the policy may be able to be deducted from your taxes. Under Section 80C of the Indian Income Tax Act, you can get a reward amount. The total amount of tax that can be avoided is limited to 1,50,000 INR.
  
• Loans: Endowment policies also give you the option to take a loan on your policy. In case of any financial emergency, you can opt for a loan up to a certain limit. These loans are covered by the terms and conditions of the product. 

A List of Popular Endowment Plans

Below is a table of some of the well known endowment plans offered by leading insurers, sum assured, premium payment terms and maturity benefits. These plans cater to different financial goals, flexible terms and big payouts.

Each endowment plan comes with unique features that align with different financial goals, providing flexibility in premium payments and substantial maturity benefits. With endowment policies, you can choose an option that suits your future needs, and gets you insurance coverage and a good return.

Things to Know Before Buying An Endowment Plan

When selecting the ideal endowment policy, it is important to take every step carefully. Here are some key points to guide your decision-making process:

• Identify your goals: Take the time to figure out what you really need and pick the plan that fits your goals. If you are looking to grow your savings by investing, an endowment plan might be a great option.
• Terms and conditions: Make sure you really understand your policy to get the most out of it and avoid any unexpected issues. It is important to look closely at payment options, the duration, the policy term and its flexibility, options for loans and withdrawals, as well as the sum assured and potential returns.
• Pick what is right for you: While endowment plans offer several attractive benefits, it is essential to concentrate on what truly meets your and your family's needs. Providers like InsuranceDekho have a list of options available where you can compare plans and choose a plan that provides the most advantage to you and your family.

Conclusion

The endowment calculator can be used to find out how much money endowment plans give you. And we clearly saw that endowment life insurance has some great benefits. 

First, when the endowment insurance plan ends, you will have a savings account. And then, you can invest the money or use it to fund a comfortable retirement. Hence, endowment insurance provides a reliable amount of money as long as you keep paying the premiums, hence making it a safe and smart choice. So, start investing now, risk-free!

FAQs

Ques1: What is an endowment plan?

Ans: An endowment plan is a life insurance policy which provides a combination of both savings and life cover, with maturity pay out either a sum-assured, maturity benefit or death benefit to the policyholder or nominee.

Ques 2: How are the returns calculated on an endowment plan?

Ans: Returns on endowment plan are calculated by adding sum assured with accrued bonuses like reversionary and terminal bonuses.

Ques 3: Can I add riders to the endowment plan?

Ans: Yes, riders like accidental death, critical illness or premium waiver riders can be added to enhance the policy’s coverage and get additional benefits.

Ques 4: Are endowment plans good for long term investment?

Ans: Yes, endowment plans are good for long term goals as it grows over time with bonuses that accumulate till maturity.

Ques 5: What if I surrender my endowment policy early?

Ans: Surrendering early may get you lower returns and penalties. It’s usually better to hold on till maturity.

Ques 6: Do endowment plans have tax benefits?

Ans: Yes, premiums and maturity benefits are tax deductible under prevailing tax laws, endowment plans are tax efficient.

Ques 7: What is a terminal bonus in endowment plans?

Ans: Terminal bonus is a one time payment at policy maturity, given to policyholders who hold the policy till maturity, as a reward for long term loyalty.

Ques 8: Can I take a loan against my endowment plan?

Ans: Yes, many endowment plans allow policyholders to borrow against the policy cash value, a convenient financing option when needed.