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Know Why Endowment Plan Is A Good Investment Choice

Updated On Aug 27, 2021

Endowment plans are two-in-one life insurance contracts. You can utilize an endowment policy to develop a risk-free savings account while also providing financial security for your family in the event of a disaster. The simplicity of an endowment plan has made it a popular savings option for many people throughout the years.

A solid endowment policy gives us the security and tax-free1 returns we need to meet future emergencies while also allowing us to achieve non-negotiable life goals like paying for our children's education, marriage, or living a dignified retired life on our own.

Reasons Why Endowment Plans Are A Good Choice

Following are few reasons why an endowment plan is a great deal:

  • Benefits On Two Levels

Endowment plans combine the advantages of long-term investing and insurance into one package. Endowment plans pay a lump sum maturity amount to the beneficiary if the policyholder lives the policy duration, as well as the sum assured (or accumulated amount minus unpaid premiums, whichever is higher) if the policyholder dies. Endowment strategies have a significant advantage in this regard.

  • Safe And Secure

Endowment plans are risk-free in terms of the total secured, even though their returns are lower.

  • Savings Through Discipline

Policyholders are required to set aside a predetermined amount for premium payment at a predetermined time interval, promoting a disciplined attitude to saving.

  • Bonus Is Guaranteed

In endowment systems, annual bonuses are frequently provided as a percentage of the money secured. Further bonuses accrued over the policy's duration are paid additional to the sum provided in the event of the policyholder's longevity. The nominee receives the death benefit, which includes the entire sum assured as well as the total cumulative bonus if the nominee dies during the policy period.

  • Riders/Additional Benefits

Policyholders can take advantage of additional benefits such as marriage/education endowment plans and double endowment plans, which are offered by insurance providers. An endowment plan will allow policyholders can pay a small additional premium to acquire riders for major surgery, serious sickness, and other conditions.

  • Access To A Loan

Policyholders can take out a loan against an endowment policy whenever they need it, and the loan is usually not secured by security.

  • Double Tax Benefits

Endowment plans have the advantage of providing tax benefits under Section 80C on the annual premium and Section 10D on the death benefit, according to the Income Tax Act.

  • Flexibility At Its Best

Another main advantage of endowment plans is that you really can pay your premium over a short span of time even while reaping the benefits of the policy throughout time. If premium payments stop after a fixed number of days, you can get free paid-up coverage with a lower sum promised if you meet certain requirements.

Conclusion

Endowment plans offer a structured approach to saving that could come in handy in the event of a financial emergency. This plan should be considered by salaried people, small business owners, and professionals like doctors and lawyers to meet their long-term financial security demands.

Endowment plans are also a good option for persons who are risk-averse and would rather settle for a lower return than take more risks.

Also Read: 

Are Endowment Policies Tax-Free?

Are Endowment Policies Tax-Free?

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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