Are Endowment Insurance Plans worth Buying?
Updated On Aug 25, 2021
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If you want to save for the future, purchasing an endowment plan or endowment insurance might be very beneficial. If you get endowment insurance now, you'll have enough money when the plan matures to cover your post-retirement expenses.
A life insurance policy's endowment fund is a contract between an insured and an insurer that allows the insured's selected beneficiary to receive a lump-sum payment following the insured's death. Furthermore, it provides a variety of benefits to the policyholder and their family throughout the term of endowment insurance, including income protection, tax* exemption, and life coverage, to name a few. As a result, you might consider your endowment insurance to be an income insurance policy.
Key Reasons To Purchase An Endowment Plan
It is critical to understand the many benefits of an endowment plan before making a decision. The following are five significant benefits of an endowment plan.
Provides Life Insurance
Life is unpredictably unpredictable. In the unfortunate event of the policyholder's death, the family may face financial hardship. In the event of such a sad occurrence occurring during the policy term, an endowment plan pays the sum insured to the loved ones. If the policyholder was the family's sole breadwinner, this sum serves as an income replacement.
Provides A Method For Saving
According to the terms and circumstances of your policy agreement, premiums for your endowment plan must be paid monthly, quarterly, half-yearly, or annually. This instills in you the habit of saving on a regular basis. You pay your premiums on time to ensure that you receive a lump sum at maturity, which you can utilize in the event of a financial emergency.
An annual bonus is offered by an endowment plan. This amount is calculated as a percentage of the total amount guaranteed. The nominee is entitled to the sum assured as well as the total accumulated bonus if the policyholder dies during the policy period. Alternatively, if the policyholder survives to maturity, he or she will be entitled to both the sum insured and any additional bonuses earned throughout the policy period.
Assists In Achieving Life Objectives
Because endowment plans pay out the collected cash after the term ends, you can use it to accomplish your own long-term goals. You can use it to fund your child's further education, a down payment on a new home, or the purchase of a new car, in addition to using it as a safety net to meet bills in your later years.
Provides tax advantages
Reduced tax obligation is one of the biggest reasons to invest in endowment insurance. Section 80C of the Income Tax Act of 1961 may provide you with a tax credit on the premiums you pay for your coverage. In addition, the death benefit amount is tax-free under Section 10D.
Endowment life insurance is a type of assurance that is commonly mistaken for a college savings plan. Term life insurance and a savings program are combined in these policies. As the policyholder, you determine how much you want to save each month and when you want the insurance to mature. When the insurance matures, you're guaranteed a specific payout, known as an endowment, based on your monthly contributions.
As long as you make the fixed monthly payments, the endowment life insurance policy provides a risk-free, guaranteed return on a specified date. Furthermore, the cash value is not taken into account when determining your child's financial aid eligibility.
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.