How To Buy the Right Endowment Plan?
Updated On Oct 25, 2021
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When you think of insurance products, do you quickly conjure up images of plans with little investment value and no liquidity for the policyholder?
Most life insurance plans, we learn, are only valuable to the beneficiaries after the life assured has passed away. A traditional endowment plan, on the other hand, maybe more suitable for your financial goals.
Endowment plans don't get enough credit because they're so convenient and have been around longer than other investment options. You may be surprised to hear that you can get the benefits of both insurance and a savings plan if you fall into this category.
A savings plan allows you to pay regular premiums and earn fixed compounded returns, with the end result being that you or your nominees receive your purchase price or premium.
It's a wealth-building investment, in a nutshell. What if we told you that you could invest while being confident in your investment? Policies like this exist!
What Does Pure Endowment Mean?
Below are a few things you must know about Pure Endowment plans:
1. Make A List Of Your Responsibilities As A Family
An endowment fund will provide for your family in the event of a disaster. The sum assured will be delivered to your pre-disclosed beneficiaries even if you die during the repayment plan or before the policy matures. Certain insurance providers, on the other hand, may have a payment schedule that must be followed for three to five years. For more information, you should contact your service provider.
2. Planning For Financial Security After Retirement
The policyholder receives a lump sum payment at the end of their insurance period under the endowment program. You might then put the money into other assets or simply utilize it to retire comfortably.
3. Life Insurance Is Required
You must first determine the amount of life insurance you require before selecting an endowment plan. You should have enough money to cover 20 times your annual pay at the absolute least. If you make ten lakh rupees per year, for example, you should purchase a plan with a two-crore rupee coverage. A multitude of factors, including your financial goals (both short and long-term), responsibilities, and dependents, influence your life insurance needs. You can use this online calculator to figure out how much life insurance you'll need.
4. The Payment Of A Premium
Compared to pure term policies, endowment plans offer a greater premium for the same amount of coverage. Because the assurer puts a portion of the premium into tax-advantaged investments, this is the case. As a result, understanding the premium you'll have to pay in order to reap the benefits is critical before obtaining endowment insurance. Because the premium is larger, it must be within your financial means. Before making a decision, you can compare premiums for endowment plans online.
5. Probably Illegal
Unless they're combined with a traditional life insurance policy that pays out to beneficiaries when the life guaranteed dies, pure endowment policies are generally prohibited by your state's life insurance rules. Term insurance is often added to a pure endowment coverage. If the life assured lives longer than the policy's term, they will get a payout, which is typically equal to the number of premiums paid. Pure endowment assurance is another term for a pure endowment.
6. Premiums Must Be Paid
In order to receive a reimbursement from the insurance provider, the life assured must continue to pay premiums and live until the policy's specified expiration date. As a result, this policy is void.
An endowment plan may be perfect for you if you are a spendthrift who spends a lot of money without thinking about it. This is because an endowment plan allows for more disciplined long-term investing. Investing in an endowment plan can be quite beneficial, especially if you have a consistent income.
Also read - Key Features of Endowment Policy
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.