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10 Most Frequently Asked Questions For Endowment Plans

Published On Jul 19, 2021

An endowment plan is a two-pronged technique that allows you to save while also protecting your assets. If the policyholder dies during the time period, the nominee receives the money covered plus bonus.

Endowment plans combine the advantages of saving and insurance with the extra protection that riders provide. Market risk is avoided with these techniques, resulting in predictable returns. Because of this, endowment schemes are more profitable to investors.

With so many insurance alternatives on the market, determining which plan is appropriate for you is critical.

Q.1 What Are The Riders Offered Under An Endowment Plan?

Enndowment plans contain the following riders:

  1. Accidental Death Benefit Rider
  2. Rider for Permanent Disability Benefits
  3. Rider for Critical Illness Benefit
  4. Benefit Rider for Life Guardians
  5. Accidental Disability Guardian Benefit Rider under which, the remaining premiums paid on behalf of the policyholder in case of accidental disability

Q.2  Is an Endowment Plan a Risk Free Insurance Option?

Endowment plans do not deal with risk since they are not affected by market circumstances. If you want total peace of mind when it comes to the money you've invested, it could be a good fit. This function ensures risk-free returns and may thus be assessed according to your risk appetite.

Q.3 Term Plans Or Endowment Plans- Which One Is Better?

Endowment plans are two-in-one plans that combine the advantages of savings and insurance into one handy bundle. Additional benefits, including death payments and maturity benefits, are available under the conditions of the policy.

A Term Plan, on the other hand, places life insurance at the top of the priority list. You must pay premiums every year for the life of a term insurance plan.

While both plans work well and may be purchased depending on the investor's requirements and financial goals, there are a few distinctions between them.

Q.4  What Is The Eligibility For Endowment Plans?

The maximum age to apply for an endowment plan insurance cover is between the ages of 55 and 60. Endowment plans are available for a wide variety of persons, as seen by the examples above, starting at the age of five or even younger.

Q.5  How To Get Tax Benefits On Endowment Plans?

This is a good choice for individuals looking to save money on their taxes. An investment in an endowment plan is eligible for a tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act. Furthermore, profits earned from it are tax-free under section 10(10D) of the Income Tax Act. In the case of an emergency or when currency is scarce, this will ensure a smooth money transaction.

Q.6 What Are The Common Exclusions Under Endowment Plans?

Endowment plans, like other insurance plans, include several circumstances in which the business is not obligated to pay for coverage. Under endowment plans, any claim originating directly or indirectly from one or more of the following is subject to general exclusions:

  1. Self-injury or attempted self-injury
  2. Participation in illegal activity
  3. Being inebriated or under the influence of drugs or alcohol (exceptions apply)
  4. Taking part in high-risk activities or sports
  5. Taking part in any riots or civil disturbances
  6. Aviation Hazard

Q.7 Is Long Term Investment Possible In Endowment Plans?

Endowment plans are a great way for a long-term saver to invest in a risk-free way.

Endowment plans are popular for accumulating a savings fund for the future. Premiums are deposited at predetermined intervals, promoting long-term savings habits.

Q8. Who Can Purchase Endowment Plan?

Endowment plans are low-risk investments. Despite the fact that it is suggested that investors start investing when they are young, these plans are intended to satisfy the needs of a diverse group of investors. It is appropriate for investors seeking financial security at any stage of their lives.

Smokers might also benefit from insurance coverage if certain requirements are met.

Q.9  Are Maturity Benefits Available Under Endowment Plans?

The policyholder will receive the lump sum payout if the policyholder survives the maturity term, according to the maturity advantages given by an endowment plan. This feature distinguishes an endowment plan from others and assures the policyholder's protection.

Q10. What Are The Bonuses Offered Under Endowment Plans?

  • Reversionary Bonus: This is money added to the amount due on maturity or death with profit. A reversionary bonus cannot be withdrawn after it has been declared, even if the insurance matures or the insured individual dies.
  • Terminal Bonus: After completing a specified period, such as 10 or 15 years, the insurance company will add a discretionary amount to the payout given on the maturity of an insurance policy or the death of an insured individual.

Take Away

It is critical for you to grasp the essentials of your insurance plan as a responsible investor. To help you with the process, we've answered all of your questions concerning endowment plans in this post.

Also read 

Why Should You Choose Endowment Plans For Retirement Planning?

When Should You Opt For Endowment Plans?

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.                 

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