A Definitive Informative Guide For Endowment Policy
Updated On Apr 30, 2021
Table of Contents
Endowment plan is a life insurance plan which provides you with a combination of both i.e. an insurance cover, as well as savings plan. It helps you in saving regularly over a specific period of time, so that you can get a lump sum amount on policy maturity, if the policyholder survives the policy term. It's also useful for securing yourself and your family post-retirement or to meet various financial needs such as funding for children's education or marriage or buying a house.
What are the Types of Endowment Plans?
There are 3 types of Endowment plans, which are mentioned-below-
1. Unit Linked Endowment Plan
Under Unit Linked plan, the insurance premiums are into multiple units allocated under a specific investment fund which can be chosen by the policyholders.
2. Full /With Profit Endowment
Under this plan, the basic amount which is the sum assured will be provided to the policy holder. This amount is guaranteed right from the start of the plan. However, the final payout provided is comparatively higher depending upon the bonuses announced from time to time by the company. The bonuses that are once declared become a part of the policy are payable in the event of death of the policyholder or maturity of the policy.
3. Low-Cost Endowment
This type of endowment plan was designed with an intention of allowing the policyholder to accumulate the funds which need to be paid after a specified time period, usually mortgage.
4. Non-profit Endowment
These types of endowment plans generally do not participate in the profits yielded by the company (bonuses). But, in order to make them competitive against other available products, companies offer guaranteed additions in such plans which help in generating returns for the policy holder.
Features of Endowment plan
The best features of endowment policy are as follows-
1. Death Along With Survival Benefits
In case of demise of the policy holder, the beneficiary or the nominee of the policy gets the sum assured along with bonuses. Also, the insured is allowed to get the sum assured if he or she outlives the policy.
2. Higher Returns
An endowment policy is useful in building a corpus for the future and providing financial security to your family. The payout for survival benefit and death benefit of an endowment plan is comparatively more than that of a classic life insurance plan.
3. Premium Payment Frequency
The policyholder can make payment of the premium based on the policy chosen by him or her. Payment can be done on monthly, quarterly, half-yearly, or on yearly basis.
4. Flexibility In Cover
Riders like critical illness, total permanent disability, and accidental death can be added to the base plans and enhance life cover. In addition to this, there are a few plans that also offer waiver in the premium payment on total permanent disability or critical illness.
5. Tax Benefits
The policyholder is entitled to get tax exemption on both of the premium payments, maturity and final payouts under the Section 80C and Section 10(10D) of the Income Tax Act, 1961.
6. Low Risk
Traditional Endowment policies are considered safer as compared to other investment options such as the Mutual Fund or the ULIP’s because the amount here is not directly invested in equity funds and the stock market.
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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.
