Life Insurance With Stable Returns - Endowment Plans
Updated On Feb 04, 2022
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An endowment plan is a financial instrument that offers both insurance and savings. An endowment plan is a type of insurance policy that promises a death payment as well as a maturity benefit. The policyholder receives a payout at maturity, but the sum assured is paid to the nominee if the policyholder dies during the policy term. Unit-linked or non-linked endowment plans are available. Endowment policies are divided into three categories: unit-linked endowment plans, with profit endowment plans, or participating and non-participating plans.
What Are The Features And Advantages Of An Endowment Plan?
Before investing in an endowment policy, make sure you understand all of the details. Despite the fact that it is a life insurance policy, it is used to save for the future. Before purchasing an endowment policy, numerous aspects should be considered.
A life insurance policy is purchased to protect against unforeseen events. An insurance plan safeguards the family's financial security in the event of a disaster. However, in addition to insurance coverage, it also includes a savings component that aids in the accumulation of wealth for the future. In essence, an endowment policy gives both death and maturity benefits.
Insurance plans may include features such as the ability to pay premiums on a monthly, quarterly, half-yearly, or annual basis. Certain plans may include extra features such as riders for accidental death, complete and partial disability, and critical illness, among others. Premium waiver options for disability and critical illness are also available in some plans.
Higher Profit Margins
An endowment policy isn't the only type of life insurance that pays out at maturity. Term plans with return of premiums, for example, pay a benefit at maturity equal to the total premium paid by the customer under the policy. There is a return on the premium in the case of an endowment plan due to the return from the funds in the case of ULIP or Bonus in the case of Participating plans or the guaranteed benefit in the case of a Non-participating plan.
Endowment plans also offer tax advantages. The premiums paid for the policy are tax-deductible under Section 80C of the Internal Revenue Code of 1961. (the Act). Furthermore, under Section 10 (10D) of the Act, the pay-out received from the policy is tax-free. The provisions of the Act, as revised from time to time, govern tax benefits.
Endowment policies are long-term investments. You can use the policy to save and build wealth in a systematic way over time. It instils the habit of saving, and depending on the type of policy, the savings grow over time.
When you have an endowment or moneyback plan, it is simple to secure the future of your loved ones. A savings plan's annual premium serves two purposes: A portion of the premium goes toward building a savings account for future life goals. The remainder is allocated to the life insurance policy. An endowment plan not only serves as a good way to save money, but it also serves as a life insurance policy. There are numerous advantages to investing in endowment plans.
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.