Basic Things To Know About Endowment Plans
Updated On Aug 01, 2021
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An endowment plan is a type of life insurance that provides coverage to policyholders in any eventuality. It is considered the best investment tool to generate a corpus over a period of time which is paid in a lump sum by the insurance company if the policyholder survives the policy term. The endowment plan also provides you with a maturity amount that you can utilize to fund your future requirements like child's education, child's marriage, property and retirement.
What Is An Endowment Policy?
Endowment plans are one of the variants of life insurance plans which provide a guaranteed sum assured amount to policyholders in addition to other benefits upon policy term’s maturity. Besides, a death benefit is also given to the nominee or beneficiary in case of the death of the insured individual or the policyholder. In simple terms, an endowment plan is an insurance tool that offers insurance and investment advantages together with policyholders. There are two types of endowment plans such as:
- Endowment Plan Death Benefits - The endowment plan pays the nominee of policyholders with the sum assured by the insurer in case of the demise of the insured person during the policy term.
- Endowment Plan Maturity Benefits - Under this policy benefit, the endowment plan offers a maturity amount to its policyholders upon surviving the policy term.
How Does An Endowment Policy Work?
Endowment plans are equipped with two clauses such as with profit and without profit. The policy with profit offers the terminal bonus including the sum assured amount to the nominee of policyholder upon policy maturity. Whereas, a non-profit endowment plan does not provide any such benefits and performs like a traditional life insurance plan. The best part of this insurance cover is that it provides the sum assured amount to the policyholder in a lump sum when the policy term ends. The insured person is allowed to invest the received amount to meet his or her financial goals in the future.
Who Should Buy An Endowment Policy?
People with a steady income wanting to save a lump sum amount after a period of time can consider purchasing an endowment plan. It is a regular and disciplined investment instrument that helps people to build emergency funds to cope up with financial contingencies in the future. Salaried people, businessmen, professionals such as doctors, lawyers, engineers, etc, can opt for an endowment plan to ensure long-term financial security. People who are risk-averse can find the best plan in the form of endowment policies. However, people with no regular income can also opt for this plan by going for single or flexi pay options.
Why Should You Buy An Endowment Policy?
To invest in an insurance instrument offering assured returns makes absolute sense. An endowment plan is an ideal tool to help you build a corpus to fulfil your long-term goals and to protect your loved ones and family against any sort of financial crisis after your death. It is a suitable insurance policy for goal-based savings and to meet your investment aims over a period of time.
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.