Know Why Purchasing An Endowment Plan Is A Great Idea?
Updated On Sep 30, 2021
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An Endowment policy is a type of life insurance that not only protects the policyholder's life but also allows the insured to build up a corpus that can be used when the policy matures. The money saved can be utilized to help the assured achieve a variety of personal financial goals.
According to the plan's terms and conditions, the policyholder would get his/her sum assured at a future period. The insurance company, on the other hand, will pay the sum assured (including any bonus, if any) to the policyholder's nominee in the event of the policyholder's sudden death. It can also be used to secure yourself and your family after retirement or to meet a variety of financial needs, such as funding for children's education, marriage, or the purchase of a home.
Reasons Why purchasing an Endowment plan is a great idea
It's critical to understand the numerous advantages of an endowment policy before deciding to purchase one. An Endowment policy has the following five significant advantages:
1. Offers Life Insurance Protection
Life has a lot of unknowns. The policyholder's family may be financially burdened in the event of his or her death. In the event of a covered occurrence within the insurance term, an endowment policy pays the sum assured to the beneficiaries. If the policyholder was the family's sole breadwinner, this amount works as an income replacement.
2. Provides A Step-By-Step Plan In Order To Save
According to the terms and circumstances of the policy document, premiums for the endowment policy must be paid monthly, quarterly, half-yearly, or annually. This instills in you the habit of putting money aside on a regular basis. You pay your premiums on time to ensure that you receive a lump sum payment at the policy's maturity date, which you can use to cover any financial emergencies.
3. Bonuses Are Available
An annual bonus is included in an endowment plan. This payment is then distributed as a proportion of the total amount guaranteed. The nominee is entitled to receive the sum assured as well as the total bonus accumulated if the policyholder dies during the policy period. Alternatively, if the policyholder lives to maturity, he or she may be eligible to receive both the sum assured and any additional bonuses earned throughout the policy period.
4. Assists You In Achieving A Variety Of Life Objectives
Because endowment policies pay out the collected money after the term ends, you can use it to achieve your long-term objectives. Apart from retaining it as a safety net to meet your costs in your golden years, you may use it to pay for your children's further education, a down payment on a new home, or the purchase of a new car.
5. Benefits From The Tax System
Reduced tax obligation is one of the most compelling advantages of investing in an endowment plan. Section 80C of the Income Tax Act, 1961, may provide you with a tax credit on the premiums you pay toward your policy. Furthermore, under Section 10D, the death benefit is tax-free.
Endowment policies are more expensive than term insurance, despite the fact that they are great investment tools that provide financial security both now and in the future. Term insurance provides more coverage for a lower cost. The sum assured may be paid to the assured's family members in the event of the policyholder's death, however, term plans do not pay any money to the policyholder at the time of maturity. An endowment plan is a hybrid of investing and insurance that combines the two. This plan provides the best of both worlds: the policyholder receives the sum assured at maturity, and the policyholder's family receives a death benefit in the tragic event of the policyholder's death.
You may also like to read - Know How Endowment Policy Is A Risk-Free Investment Tool?
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.