Know How Endowment Policy Is A Risk-Free Investment Tool?
Published On Sep 30, 2021 10:00 AM By InsuranceDekho
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An Endowment policy is a type of life insurance that provides the policyholder with two benefits: life insurance and a way to save for the future. When a policyholder purchases and pays the premiums for an endowment policy, a portion of the funds is used to pay for life insurance premiums, while the other half is set aside as savings. Endowment plans are a great method to save money over time while also acquiring life insurance.
Wealth appreciation is another benefit of endowment schemes. Aside from the advantages of an endowment plan, there are other compelling reasons to invest in one. See why you should buy an endowment plan in the following paragraphs.
Reasons Why Endowment Policy Is A Risk-Free Investment Tool
Below are few things to know how Endowment Policy is a risk-free investment tool:
1. Serves Dual Purpose
Endowment plans are a type of life insurance that serves dual purposes. This sort of plan provides both life insurance and long-term investment benefits. This means that the life assured can benefit from the advantages of a life insurance policy while also having the option to build a corpus that can be used when the time comes.
2. Returns With No Risk
Endowment plans provide poor returns, yet they are considered risk-free. Returns on endowment plans are risk-free. Endowment plans guarantee returns after a set period of time if premiums are paid on a regular basis, and these returns are risk-free.
3. Payment Of Death And Maturity Benefits
Because an endowment plan is a sort of life insurance, it pays out a death benefit. In the event of the life assured's untimely death, the death benefit is paid to the nominee. Aside from the death benefit, if the life assured lives to the end of the policy term, he or she is entitled to a maturity benefit at the end of the policy term. The life assured has the option of receiving the maturity benefit as a lump payment or as a recurring income stream.
4. Supplementary Income Benefit
You can benefit from an endowment plan by obtaining more income. You can take advantage of an annual incentive that is announced on your endowment plan. These annual bonuses could be equal to a certain percentage of the guaranteed total. This annual bonus is paid simultaneously with the maturity benefit upon maturity. In the event of the life assured's untimely death, the nominee will receive the annual bonus as well as the death benefit.
5. Benefits From Taxes
Under Section 80C of the Income Tax Act, an investment in an endowment plan is eligible for a tax deduction of up to Rs. 1.5 lakh. Also, if the premium paid is at least 10% of the sum assured or the sum assured is a minimum of 10 times the premium, the proceeds are tax-free under Section 10(10D) of the Act.
6. Increased Coverage Option
Endowment plans provide life insurance coverage as well as long-term investment opportunities, but riders can be added to increase your life insurance coverage. Riders can be added to a basic life insurance policy to increase the coverage available.
7. Low Risk
Endowment plans provide assured returns with minimal risk. Because the vast majority of endowment programs are not market-linked, they are unaffected by market volatility.
A life insurance and investing instrument combined, an endowment plan. Aside from providing a dual purpose, an Endowment plan can be quite beneficial to people who desire to build up their savings for future financial needs. Endowment plans can help you reach your financial objectives by providing additional income. Investments in endowment plans are a solid idea.
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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.