Pure Endowment Plan in Life Insurance

A pure endowment policy is not a typical life insurance policy. It doesn't have any beneficiaries, so the insurance company won't pay out any benefits if the life assured doesn't live until the end of the policy period. To receive reimbursement from the insurance company, the life assured must continue to pay premiums and live until the policy's set expiration date.

Therefore, a pure endowment policy can't be considered a legitimate life insurance policy without being paired with some type of traditional life insurance policy that pays out to beneficiaries when the life assured dies. In your jurisdiction, pure endowment policies may be considered illegal unless they are accompanied by a traditional life insurance policy.

Definition of Pure Endowment Plan

A pure endowment policy is frequently paired with some sort of term insurance. If the life assured lives beyond the policy's stipulated term, they will be reimbursed some money—usually an amount equal to the premiums they paid. A pure endowment is also known as a pure endowment assurance.

An endowment Policy is a form of life insurance policy wherein the insurer offers to indemnify the life assured a preset sum of money if the insured survives a set period. These payments are usually made in one lump sum. 

Pure Endowment Plan in Insurance - Benefits

Below are some of the things about the Pure Endowment plan:

1. Savings

In the former, there is no saving aspect, whereas, in the latter, there is. A Pure Insurance policy requires you to pay a premium for a set period (typically no more than 35 years), after which the Nominee will be paid the Insurance amount if something happens during that time. You will receive nothing if you make it to the end of the term. There is an option where you pay a higher premium and then get your money back if you survive.

2. Maturity

If you live to retire, you will get the amount assured, as well as any bonuses you have accrued and, in some cases, a one-time bonus. Though the Endowment policy appears to offer a good rate of return, you only get about 5% each year. When compared to a Pure Insurance Policy, which provides a high level of coverage for a fraction of the cost of an Endowment Policy, your insurance coverage is extremely limited.

3. A Specific Amount Is Covered

A pure endowment is a form of life insurance wherein the carrier promises to pay the assured a set amount of money if the assured lives to the end of the policy's term. These funds are usually made in one lump sum.

4. No Beneficiaries

A pure endowment, unlike a typical life insurance policy, has no beneficiaries, which means that if the insured does not live to the end of the policy period, the insurance company will not pay out any benefits.

5. Probably Illegal

Pure endowment policies are generally banned under your state's life insurance rules unless they're paired with a conventional life insurance policy that pays out to beneficiaries when the life assured dies. A pure endowment policy is frequently paired with some sort of term insurance. If the life-assured lives are longer than the policy's term, they will get a payout, usually equivalent to the amount they paid in premiums. A pure endowment is also known as a pure endowment assurance.

6. Premiums must be paid

The insured must continue to pay premiums and live until the policy's stipulated expiration date to get a reimbursement from the insurance company. As a result, this isn't a valid life insurance policy. 

Conclusion

Pure endowments differ in the types of life insurance policies in that if the life assured dies before the policy matures, no benefits will be paid out. As a result, no beneficiaries on a standalone pure endowment policy are required. If the policyholder is no longer alive to receive the benefits, the benefits are passed on to beneficiaries in other forms of endowment insurance.

You may also like to read - General Difference Between Endowment Plans And ULIPs

Disclaimer: This article is issued in the general public interest and is 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.