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Benefits of Purchasing Endowment Plans

Published On Mar 12, 2021, Updated On Apr 22, 2021

An endowment plan is a type of life insurance plan which offers life coverage and provides the life assured and opportunity to grow his/her corpus for future financial requirements. Under an endowment plan if the life life assured passes away during the policy term, a death benefit is payable to the nominee. In case the life assured survives the entire policy tenure then he/she is provided with a guaranteed maturity along with guaranteed additions accrued on an annual basis.

Also Read:- The 5 Most Popular Endowment Plans In India

Benefits of Purchasing Endowment Plans

You can make use of the following benefits by opting for an endowment policy.

1. Death Benefit

Upon the unfortunate death of the policyholder, the endowment plan shall provide a sum assured on death to the nominee of the life assured. This benefit is  generally subject to a minimum amount equivalent to 105% of the total premiums paid till the date of death.

2. Maturity Benefit

On successful survival of the life assured till the end of the policy term, a guaranteed maturity benefit is payable to him/her. These proceeds qualify for a tax exemption under Section 10(10D) of the Income Tax Act.

3. Guaranteed Additions

These plans also feature guaranteed additions to the maturity sum assured of the plans. These additions are generally equivalent to a certain percentage of the basic sum assured and added to the savings corpus at regular yearly intervals.

4. Rider Benefits

An endowment program provides the following riders for the enhancement of the coverage of a standard plan - 

  • Accidental Death Rider: Under accidental rider, the death benefit is payable to the nominee in the event of unfortunate demise of the life assured by being involved in a serious accident.
  • Critical Illness Rider: Critical illness rider provides protection against the terminal illnesses. If the life assured is diagnosed with a terminal illness then the life assured is payable with a lump sum amount to meet the medical treatment expenses.
  • Accidental Disability Rider: Under accidental disability rider a lump sum is payable if the life assured acquires a permanent and total disability in an accident and becomes unable to earn a living.

5. Tax Benefits

Endowment plans qualify for tax deduction of up to Rs. 1.5 Lakh under Section 80C and for a tax exemption on its proceeds under Section 10(10D) of the Income Tax Act.

You May Also Like To Read:- Term Insurance And Endowment Plan: 5 Major Differences

When Should You Purchase An Endowment Plan?

Conclusion

The endowment policy has the qualities of an insurance policy as well as an investment policy. The wide variety of rewards and features makes this plan a perfect choice for many.

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