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Discovering The Need For Endowment Policies

Published On Jan 01, 2022, Updated On Jan 03, 2022

An endowment is a form of investment strategy. It allows investors complete access to their funds after a set length of time (in this case, five years) or when the policyholder passes away. Endowment plans in South Africa are taxed at a lower rate (compared to the typical tax rate of an individual in the highest income tax bracket).

It's critical to keep in mind that an endowment is a long-term investment. You must invest for at least five years to reap the full benefit of this sort of investment. You will be able to withdraw your funds at any time after five years. You will not have to pay any further taxes on your investment if you decide to withdraw your funds.

Discovering The Need For Endowment Policies

Below are a few reasons why Endowment policies are a great deal:

1. Survival Benefits

The sum promised will be paid to the policyholder if he dies within the period of the endowment policy. If the policyholder lives to the maturity date, he will get the sum promised plus the cumulative bonus up to that point. It's not like a term insurance policy, where you don't get paid if you live over the policy's term.

As a result, endowment policies are a popular insurance product. The maturity length of endowment policies might range from 10 to 15 years, depending on the firm supplying the endowment policy.

2. Declaration Of Bonus

Annual bonuses are commonly expressed as a percentage of the total money assured in endowment policies. This stated annual bonus is paid from the endowment policy's long-term returns. With the majority of endowment plans, the bonus percentage given is usually 4-6 percent.

3. Transfer Of Wealth

On your endowment, you can name a recipient. The money in your endowment account is paid out to your beneficiary in the event of your death, and you don't have to pay the executor's fees.

4. Flexibility And Discipline

After five years, you can withdraw your endowment investment without penalty. You have flexibility in that you may swap between the unit trusts at any moment. There may be penalties if you withdraw partially or completely before 5 years, or if you lessen or cease contributing.

5. Tax Efficiency

Individuals in the highest income tax bracket benefit from lower tax rates on growth in endowment plans.

6. Investment Choice

You can choose from a variety of unit trusts to fit your risk profile by selecting one or more underlying unit trust funds.

7. Cashback Benefit

A payback reward is included with some endowment insurance. In addition to the maturity payout, these policies are designed to pay out cash benefits at predetermined intervals. In that regard, an endowment plan like this would be great for achieving any short- or medium-term financial goals you may have through regular guaranteed payouts. These goals could be anything – from funding your child's higher education to sending your family on a timely international trip – and an endowment plan can help you achieve them while also protecting your family.


A policyholder's death benefit is the only benefit offered by an insurance plan. An endowment plan, on the other hand, is a special type of insurance that combines investment with protection. If the policyholder lives to see the endowment plan expire, he or she will be paid the sum promised plus the bonus as a maturity benefit. As a result, endowment insurance is a profitable tool that offers both savings and financial protection. In comparison to a regular insurance plan, endowment plans have higher premiums since they provide higher returns in the form of sum assured.

Also read - Understanding The Different Types Of Retirement Plans

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.

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