Understanding The Different Types Of Endowments Plans And Their Benefits

Endowment policies combine the benefits of a life insurance policy and an investment tool. Under this plan, you get to strategically invest your money on a regular basis which shall be provided to you at the time of plan maturity. Under an endowment plan, a death benefit is provided in case of your unforeseen demise during the policy tenure. This type of life insurance policy also provides a maturity benefit in case you survive the entire policy tenure. 

Endowment plans are a great way to ensure financial security for your family with or without you in the picture. In difficult times this plan helps your family to fulfil their daily financial requirements and pursue their dreams even in your absence. 

Different Types of Endowment Plans

Below mentioned are different types of endowment policies available in the market:

• Unit-Linked Endowment Plan: Unit-linked endowment policies invest premiums paid towards the policy in a market-linked investment option. Premiums paid towards a unit-linked endowment policy are split into specific equity funds and insurance cover. The returns on investment highly depend on the performance of the investment fund. People with a high-risk portfolio can choose to invest in unit-linked endowment plans.

• Full Profit Endowment Plan: A basic sum assured which is equal to the death benefit is provided to the life assured under the full profit endowment plan. Under full profit, endowment plans a death benefit along with an additional bonus (if any) is provided to the nominee. 

• Non-Profit Endowment Plan: Under non-profit endowment policy a maturity benefit equal to the basic sum assured shall be provided to the life assured in case he/she survives the entire policy tenure. A death benefit equal to the basic sum assured is provided to the nominee in case of unforeseen demise of the life assured during the policy term. 

• Low-Cost Endowment Plan: Low-cost endowment plan helps the life assured to build a corpus for the future, which is provided after a certain period of time. This type of endowment plan is usually used to pay off mortgages, loans and other financial liabilities. If the life assured passes away during the policy, the death benefit shall be provided to the nominee. 

Benefits of Endowment Plans

Below mentioned are some benefits of purchasing an endowment policy:

• Endowment plans serve the dual purpose of life cover and savings. 
• These plans provide financial protection to the life assured and the family of the life assured. 
• Endowment plans provide maturity benefits, at the end of the policy term.
• These plans provide wealth appreciation, as they are participating in life insurance policies. 
• Premiums paid towards an endowment policy are eligible for tax exemptions. 

To Conclude

Endowment policies ensure that you and your family will be provided financial security irrespective of whether you survive the policy term or pass away before the maturity of the policy. The basic sum assured shall be provided at the end of the policy term or in case of your unforeseen demise during the policy tenure. Endowment policies do not guarantee bonuses but allow wealth appreciation as they are participating in life insurance.

Also Read: 

Are Endowment Policies Tax-Free?

Are Endowment Policies Tax-Free?

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.