Planning to Buy an Endowment Plan
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Fulfilling the dual need for protection and savings, endowment plans are one of the most popular life insurance products available in the market. Providing maturity benefits on survival of the policyholder after the end of policy term and death benefit to the nominee of the policyholder on the latter’s demise, make these plans comprehensive.
Few Things To Keep In Mind While Buying An Endowment Plan
However, before you buy an endowment plan, here are a few things to keep in mind:
Life Insurance Cover Needed
Before zeroing-in on an endowment plan, you must gauge the life insurance cover you need. Ideally, the cover should be at least 20 times of your annual income. For example, if you are earning ₹10 lakh per annum, you should buy a plan offering you a cover of ₹2 crores.
The quantum of your life insurance cover depends on several factors including your financial goals (short and long-term), liabilities, and dependents, among others. You can use this online calculator to determine the amount of life insurance cover you need.
Premium to be Paid
Endowment plans command a higher premium for the same life insurance cover, unlike pure term plans. This is because the insurer invests one portion of the premium in safe avenues for wealth creation. Hence, before purchasing, it’s important to know the premium you need to pay to enjoy the benefits of your endowment policy. Since the premium is relatively higher, it should fit in well with your current income and expenditure. You can compare premiums of endowment plans online before making a choice.
Provision of Periodic Pay-outs
Periodic pay-outs at distinct intervals of policy term ensures you can plan and fulfil your short-term financial obligations such as making a down payment for a car, going on a long-desired vacation, undertaking home renovation, etc.
Claims Settlement Ratio
The purpose of life insurance gets defeated in case of claim rejection. Hence, it is essential for you to check the claims settlement ratio of your insurer before buying an endowment policy. The claims settlement ratio indicates the ratio of the number of claims received by the insurer to the number of claims accepted.
Conclusion
Protection and savings to build a corpus make endowment plans one of the most robust financial tools to cushion your dependents from uncertainties of life and achieve your financial goals. Keeping the above factors in mind while buying an endowment plan will help you get the policy best suited to your needs.
