How To Perform The Best Comparison Of Endowment Plans?

An endowment policy allows you to increase your money faster than inflation. The plans are also suitable for those who want to save for a specific goal because they pay out a flat sum. People who have taken out interest-only mortgages used to like them because of this. However, the popularity of endowment insurance has diminished as fewer of these mortgages are available presently, especially after a mis-selling controversy. If set up to pay out a lump amount at the time of retirement, they can still serve as a complement to pension savings. 

However, the product has seen a resurgence, with a few specialized providers now selling new endowment policies. Here's what you need to know if you already have a product and aren't sure what to do with it, or if you're considering purchasing one as a future investment. Endowment policies also come with a variety of riders. In your specific situation, not every rider may be required. Before making a final decision, you must first analyze your future demands and compare endowment policies that provide the greatest riders for your scenario.

How To Perform The Best Comparison Of Endowment Plans?

Below are a few things to remember to make the best comparison of Endowment plans:

1. Riders

The policy's protection is enhanced by add-ons or riders. Compare riders' performance in the following categories:

• Death by mistake
• Disability
• Illness that is considered critical
• Hospital cash payments
• Premiums waived
• The sum will be increased sooner

Your lifestyle will dictate the type of rider you require. Accidental death insurance may be handy if you travel frequently. The disability rider may be appropriate if you work in high-risk areas or if you have a family history of serious illnesses.

2. Bonus

The manner in which and when bonuses are paid is determined by the sort of insurance policy you have. These are the different kinds of bonuses:

• Annually - You will be awarded monthly bonuses to supplement your lump amount throughout the insurance period if the fund has performed successfully.
• Occasionally - If specific circumstances indicate that profit can be made, you may be paid a bonus.
• Terminal bonuses - At the end of the term, if the fund has produced a profit, these are added to your account. They can account for as much as half of the maturity amount, so a bad fund can have a big impact on how much money you get.

3. Maturity

In general, the idea behind endowment insurance is that you take the lump sum and utilize it to pay off large debts such as your mortgage or your child's university tuition or to enjoy some indulgences in retirement. You might also put the money towards a new product.

The other alternative is to prolong your coverage in order to save for anything else in the future, although it may be more cost-effective to move your money elsewhere. Consult a financial advisor to see if an endowment policy is right for you.

4. Cost

Depending on the success of their funds, you'll be provided varied maturity amounts by different providers. The percentage of your payments used to cover the policy will depend on your age, gender, and policy term if you're taking out a life assurance component.

Conclusion

Endowment policies are available in India in a variety of forms. Before purchasing a plan, you should familiarise yourself with the various varieties in order to evaluate which scheme would provide the best returns. When it comes to choosing an endowment policy, you must consider your age, your income, the amount you can pay in premiums, and your risk appetite.

Before you make a decision, compare the premium pricing, the insurance company's track record in terms of the amount of bonus it has paid to policyholders and in terms of claim settlement, as well as their financial situation and customer service.

Also read - Understanding Endowment Policy With An Example

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.