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Know How You Can Save Tax With The Help Of An Endowment Policy

Published On Dec 16, 2021

When it comes to life insurance, an endowment policy is a wise choice. It's a policy that combines life insurance with long-term savings after a set length of time, making it a hybrid of insurance and savings.

The time term is usually between 5 and 20 years, after which the policyholder can get the matured amount. The policyholder's nominee receives the money in the event of the policyholder's death. A traditional term life insurance policy only benefits the policyholder's nominee(s) after his or her death. Choosing the right sort of life insurance to safeguard their family while also delivering financial rewards is, without a doubt, one of the most difficult decisions that practically every insurance seeker has to do today. Although the goal of all life insurance policies is to protect your family from the myriad risks that life throws at them, not all policies offer the same financial rewards. As a result, understanding the life insurance environment can be difficult, particularly if you're inexperienced with the different forms of insurance available.

Know-How You Can Save Tax With The Help Of An Endowment Policy

Below are a few ways how Endowment policy helps you save tax:

  • Can I Take Money Out Of My Investment If I Need It?

During a restriction time, you may only withdraw money once, but you may face penalties. The 120 percent rule can be used to extend the restricted period. You may withdraw any amount, at any time, once the restricted period has ended. You can also schedule a monthly withdrawal.

  • Why Are Endowments Useful In Estate Planning?

Endowments allow you to name beneficiaries, which means that when you die, the money you invested will be paid immediately to the beneficiaries, and they won't have to wait for the estate to be settled. You can also name a beneficiary to inherit your investment and take over as the new policyholder if you pass away. There will be no executor's fees imposed on the amount paid out, but it will be included in the estate for the purposes of calculating estate duty.

  • What Constitutes An Endowment's Core Structure?

It has a five-year minimum spend phrase; makes it possible to make a one-time or repetitive donation; the money invested is taxable in the hands of the investment life company; and, depending on the platform you invested on, you can choose to invest in a combination of unit trusts and switch freely between them at any time during the investment period.

  • What Are The Advantages Of Putting Money Into An Endowment?

Endowments are taxable in the hands of the investment life company and are taxable at a rate of 30%; if your marginal income tax rate is higher than 30%, you can benefit from tax savings in an endowment; these investments can be used for estate planning purposes because they are payable to your nominated beneficiaries on death, and The first five years are restricted, but after that, you may withdraw from your investment at any time, or schedule regular withdrawals.

  • Death Benefit

This is the sum of money your family members will earn if they submit a lawsuit in the event of your early demise. This is the same as the coverage of a life insurance policy.

  • Tax Benefits

Endowment coverages also come with tax advantages. According to India's Income Tax regulations, the premiums you pay can assist you to lower your tax liability.


Only after careful deep consideration should anyone purchase any insurance coverage. As a result, make sure you fully comprehend the thing you're considering purchasing and how it functions. After all, this is a decision that will have a long-term financial impact on you and your family, so take your time and make an informed selection. That said, if you don't have an endowment insurance policy in place to safeguard your family, you should ask yourself why not.

Also read: 

Here's What You Need To Keep In Mind Before Buying Endowment Policy

Types 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.

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