Common MIstakes Made While Buying Endowment Plan
Updated On Jul 19, 2021
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An endowment plan is a type of life insurance policy which serves dual benefits. These plans not only offer coverage for an individual’s life in the event of unforeseen death but also provide maturity benefit towards the end of the policy term. In simple terms, these endowment plans help the policyholder in accumulating the savings and at the same time provide them with the benefit of a life insurance plan. It helps the policyholder in planning and saving their money systematically in order to meet their short term as well as long term financial goals.
However, there are certain new buyers and often at times some experienced buyers, who generally end up making certain common mistakes at the time of buying an endowment plan.
Common Mistakes to Avoid When Buying an Endowment Plan
At the time of buying an endowment plan, it is imperative for you to carefully research each and every aspect of an endowment plan. Given below are some tips that can assist you in avoiding common mistakes made by individuals at the time of buying an endowment plan:
Not Choosing Appropriate Add-Ons
At the time of buying an endowment plan, there are many who fail to choose appropriate add-on covers along with their basic insurance plan. These add-on covers are offered by the insurance company in order to enhance the coverage offered under the plan at the cost of an additional premium. Some of the common add-on covers offered by insurance providers are death benefit add-on, critical illness add-on cover etc.
Not Checking Available Flexibility Options
A policyholder can select the premium payment towards their endowment plan depending upon their income flow. Before you decide to buy a particular endowment plan, make sure to select a plan that provides the flexibility to select the premium paying mode i.e. on monthly basis, quarterly basis, half-yearly basis or annual basis.
No Knowledge regarding Types of Endowment Policy
Before investing in an endowment plan, it is quite imperative to know regarding types of endowment plans available in the market. Basically, there are 4 types of endowment plans available, namely full endowment plan, unit-linked endowment plan, non profit endowment plan and low cost endowment plan. A portion of the premium paid towards the endowment plan is utilized to buy a life cover and the remaining portion is invested in non-profit and profit-based investment tools.
Not making Comparison of Different Endowment Policies
Apart from making comparisons of various features and benefits of different endowment plans, make sure to choose a plan that is completely and easily understandable. While purchasing an endowment plan, it is significant to keep certain factors in mind like risk appetite, income, long term objectives, your other requirements, etc. Moreover, alongside above mentioned factors, make sure to do a comparison of different insurance providers and endowment plans offered by them in order to select the best one.
Not Investing Early
It must be one of your top priorities to invest money in order to get good returns in the future, especially a salaried individual. When you plan to invest your money earlier in life, it assists you in investing for a longer duration. By investing your money in an endowment plan, you would not only get good returns but also you can get the advantage of having a life cover at a young age.
At the End
Investing in an endowment insurance policy is an excellent way to secure the future of yourself as well as your loved ones. With the help of this insurance plan, you can enjoy receiving good returns alongside regular savings. While purchasing an endowment plan, make sure to keep the afore-mentioned points in mind in order to secure a good life cover.
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.