Planning to Buy an Endowment Plan? Here's What You Should Consider

An endowment plan is one of the popular life insurance plans available in the market which helps an individual in fulfilling the dual objectives of savings as well as protection. These insurance plans are comprehensive in nature as they offer a maturity benefit on the survival of the policyholder throughout the plan duration and a death benefit is offered to the nominee appointed by the policyholder upon the latter’s death. However, prior to buying an endowment plan, listed below are a few things that you must keep in mind:

• Life Insurance Coverage Required

Before you choose a particular endowment plan for yourself, you must carefully analyze the amount of life insurance coverage that you require. Preferably, the insurance coverage that you must opt for should be at least 20 times of your yearly income earned. For instance, if one is earning Rs 10 Lakh per annum, then they should purchase a plan offering a cover of Rs 2 Crores. The amount of life insurance cover you need depends on various factors including liabilities, dependents, your financial goals (both short term and long term).

• Claim Settlement Ratio

The whole purpose of one purchasing a life insurance plan would get defeated in the event of claim rejection. Therefore, it is important for you to go through the claim settlement ratio of your insurance company prior to purchasing an endowment plan. A claim settlement ratio is indicative of the ratio of total number of claims received by an insurance company to the total number of claims accepted by them.

• Premiums Payable

An endowment plan in comparison to a pure term life insurance plan commands a higher premium for the same sum assured. It is because the insurance company invests a portion of premiums in saving avenues for the purpose of wealth creation. Therefore, prior to buying an endowment plan, it is significant to know the amount of premium you are required to pay in order to enjoy the benefits offered under an endowment plan. As the premium payable is comparatively high, it must fit in well with your present income and expenditure. You must also do a comparison of premiums payable under the endowment plans available in the market online before zeroing on a particular plan.

• Periodic Pay-Outs

With a periodic payout option at different intervals of plan, duration makes sure one can fulfill all their short term financial liabilities like going for a vacation, paying the down payment of the car, planning to do home renovation, etc.

At The End

The major reason why an endowment plan is one of the most robust financial instruments is due to its ability to act as both a life protection tool as well as a savings instrument to create wealth. It offers protection to the policyholders' dependents during uncertainties of life and also helps one in achieving financial goals. By keeping the aforementioned factors in mind at the time of purchasing an endowment plan, one can easily buy the best endowment plan for themselves as per their needs.

Also Read:

Some Salient Features Of An Endowment Plans

Key Benefits of an Endowment Plan

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.