Are Endowment Plans A Good Investment Choice?
Published On Sep 29, 2021
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Endowment plans are life insurance contracts that include two benefits. An endowment policy can help you build a risk-free savings account while also protecting your family financially in the case of a calamity. Endowment plans have been a popular savings choice for many people throughout the years because of their simplicity.
Strong endowment insurance gives us the security and tax-free returns we need to meet future emergencies while also allowing us to achieve non-negotiable life goals like paying for our child's schooling, marriage, or living a meaningful retirement on our own.
An endowment policy is a set of coverage that uses a combination of both savings and an insurance scheme.
You will be able to save consistently with this form of insurance plan, allowing you to earn a lump sum payment when the policy matures. Depending on the mentioned terms and circumstances, you will get an assured sum at the end of the insurance term. The insurance company will pay the guaranteed amount, plus any earned bonus (if any), to the nominee named in the policy in the event of your death.
Endowment Plans: Why They're a Smart Investment
The following are some of the benefits of an endowment plan:
1. On Two Levels of Benefit
Endowment plans bring together the benefits of long-term investing and insurance in one bundle. If the policyholder lives the policy duration, endowment plans pay the beneficiary a lump sum maturity amount, as well as the sum, promised (or the cumulative amount minus unpaid premiums, whichever is higher) if the policyholder dies. In this aspect, endowment schemes have a clear advantage.
2. Safe And Secure
Even if their returns are lower, Safe And Secure endowment plans are risk-free in terms of the total invested.
Must Read: Best Endowment Plans In India
3. Savings Through Discipline
Policyholders must set aside a predetermined amount for premium payment at a predetermined time interval, which encourages a disciplined approach to saving.
4. Bonus Is Guaranteed
Annual bonuses are often given as a percentage of the money invested in endowment schemes. Additional bonuses accrued over the policy's duration are paid in addition to the sum provided if the policyholder lives to be 100 years old. If the nominee dies within the insurance period, the nominee receives the death benefit, which includes both the full sum assured and the total cumulative bonus.
5. Extra Benefits/Riders
Additional perks, such as marriage/education endowment plans and double endowment plans, may be offered by insurance firms to policyholders. Under an endowment plan, policyholders can acquire riders for major surgery, catastrophic illness, and other events for a small additional cost.
6. Obtaining Funds
Policyholders can take out a loan against their endowment policy at any time, and the loan is typically not backed by collateral.
7. Double Tax Benefits
According to the Income Tax Act, endowment plans receive the benefit of tax benefits under Section 80C on the annual premium and Section 10D on the death benefit.
8. Flexibility At Its Best
Another major benefit of endowment plans is that you can pay your premium over a very short period of time while still benefiting from the policy's benefits. If you stop paying your premiums after a specific number of days, you may be eligible for free paid-up coverage with a lower promised total if you meet certain criteria.
Endowment plans provide a methodical strategy for saving that could be useful in the event of a financial emergency. To meet their long-term financial security objectives, salaried people, small business owners, and professionals such as doctors and lawyers should consider this plan.
Endowment plans are also a suitable choice for risk-averse individuals who would rather accept a lesser return than taking more risks.
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.