Reasons That Make Endowment A Better Insurance Choice Over Other Types

A classic life insurance plan is an endowment plan. It offers insurance and savings in one package. If the policyholder dies before the end of the term, the lump sum assured (the death benefit) is paid to the nominee. The lump-sum assured (survival/maturity benefit) is given to the policyholder if he or she lives to the end of the policy term.

Unlike term insurance plans, which do not guarantee a payout if you die, and unit-linked insurance plans (ULIPs), which are risky investments because they are completely reliant on market performance, endowment plans are risk-free investments that allow you to save for the future while also covering your life's risks. Participating and non-participating endowment plans are the two types of endowment funds. Endowment plans that share in the company's profits is called participating endowment plans. In other words, you will earn a portion of the company's revenues as additional bonuses in addition to the amount guaranteed. It simply means that it is a without-profit plan if it is a non-participating endowment. An endowment policy is not a ULIP because it is a standard Life Insurance plan.

Reasons That Make Endowment A Better Insurance Choice Over Other Types

Below are a few reasons that make Endowment a better insurance choice over other types:

1. Dual Benefits

To protect against unforeseen occurrences, life insurance is purchased. In the event of a calamity, an insurance policy secures the family's financial security. However, in addition to insurance coverage, it includes a savings component that aids in the creation of future wealth. A death and maturity benefit is essentially provided through an endowment policy.

2. Increased Profit

The one and only life insurance policy that provides maturity rewards is an endowment policy. Term plans with a return of premium pay a benefit at maturity that is equal to the total premium paid by the customer. There is a return on the premium in the event of an endowment plan due to the return from the funds in the case of ULIPs, Bonus in the case of Participating plans, or the guaranteed benefit in the case of Non-participating plans.

3. Flexibility

Premiums might be paid every month, half-yearly, or annually, depending on the insurance program. Riders for unnatural death, full and partial impairment, and critical illness, among other things, may be included in certain plans. For disability and critical illness, several plans additionally offer premium waiver options.

4. Tax Benefits

Tax advantages are available through endowment programs. Section 80C of the Income Tax Act of 1961 allows you to deduct the premiums you paid for the policy (the Act). Furthermore, under Section 10 (10D) of the Act, the policy payout is tax-free. The Act, as revised from time to time, governs the availability of tax benefits.

5. Long-Term Savings

A long-term investment, an endowment policy is. You can save and accumulate wealth over time by following the policy. It establishes a savings habit, which grows over time based on the insurance type.

6. Riders

If the option is offered under the plan, one can choose to increase the insurance coverage of an endowment policy by adding riders. You have the option of selecting either a critical sickness rider or an accidental death rider. Choose a policy with a wide range of riders so you may tailor it to your specific needs.

7. Features Of Endowment Policies

Endowment policies have a variety of elements.

• Endowment policies not only protect the policyholder's family financially but also help the policyholder develop a future corpus.
• Monthly, quarterly, half-yearly, and annual premiums are also available.
• Additional riders, such as critical illness and personal accident and disability benefits, are available to policyholders.
• Sections 80 C and 10 (10) D provide advantages to policyholders.

Conclusion

Your family members will also profit from regular payments. If you pay your premiums on time, you will not only receive the amount guaranteed, but also a bonus. Profit and non-profit endowment plans are the two types of endowment plans available. There are various plans accessible for you under each plan. You have the option to select a plan depending on your long-term financial objectives.

Also read - How Is Premium Of An Endowment Policy Calculated?

Key Features Of An Endowment Policy You Must Know About

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.