Reasons To Buy Endowment Insurance Plan
Published On Mar 20, 2023 10:00 AM By InsuranceDekho
Table of Contents
Life insurance is a financial tool that provides policyholders with peace of mind and protection during times of uncertainty. There are different types of life insurance policies. One such type is endowment insurance. Through this type of plan, the policyholders receive a lump sum amount at the time of maturity or death, whatever the case may be. Endowment plans also provide coverage for critical illnesses. In addition to this, there are many other benefits to purchasing endowment insurance plans. Read on to this blog post to find all the reasons to buy endowment plans.
What is Endowment Insurance?
Endowment plans are a type of life insurance plan that offers policyholders both insurance coverage and savings. You can achieve your long-term financial objectives by consistently saving a portion of your income with endowment insurance. If the policyholders survive the policy term, they will be eligible for a maturity benefit in the form of a lump sum payment. Moreover, in case of the demise of the life assured, an insurance company will pay a death benefit to the nominees or beneficiaries of the policyholder.
Features Of Endowment Insurance
Some of the key features of an endowment insurance plan are highlighted below.
- The policyholders receive both maturity benefits for surviving the policy tenure and death benefits to the nominees in case they pass away.
- As endowment plans provide higher returns, you can create a corpus of wealth to accomplish your short-term and long-term financial goals.
- The policyholders can either make regular, single or limited premium payments based on the type of policy they choose. You can also pay premiums monthly, quarterly, annually, or semi-annually depending on your financial situation.
- Endowment plans provide comprehensive protection to the policyholders. You can enhance the coverage of your plan by including riders such as critical illness riders, total disability and accidental death benefit riders.
- Unlike other investment products such as mutual funds or ULIPs, endowment plans are considered safe investments. This is because a premium paid by you against the policy is not invested directly in funds.
Why Should You Buy Endowment Insurance?
Here are some reasons to purchase an endowment insurance plan:
- Financial Protection: An endowment plan provide financial peace and protection to the policyholder. Hence, when a breadwinner of the family passes away, an insurance company will give protection to his or her family.
- Guaranteed Returns: With an endowment plan, a policyholder will get a guaranteed maturity upon the completion of the policy tenure or death benefit on the demise of the life assured, whichever the case may be. Therefore, premiums paid by you against the policy are safe with an insurance company.
- Tax Benefits: Another major advantage of purchasing an endowment plan is that premium paid is eligible for tax deduction under Section 80C of the Income Tax Act, 1961. Moreover, maturity and death benefits received by the policyholder are tax-free under Section 10 (10D) of the Income Tax Act.
- Low Risk: When you are younger, you can afford to commit to a higher level of investment risk, but you still need to balance your portfolio with certain low-risk options. The ideal solution is an endowment plan, which has a significantly lower risk profile. By doing this, you can maximize your portfolio profits while lowering your overall portfolio risk.
Who Should Invest in Endowment Policies?
According to expert life insurance advisors, anyone who wants a lump sum amount after a specified time and wants to create a source of regular earnings can invest in endowment plans. These plans pave the way to accomplish financial goals for small business owners, wage earners, and professionals like lawyers and doctors.
Endowment plans are also a great choice for those who are risk-averse and are willing to accept lower returns. In contrast, endowment insurance is most suitable for the low- and middle-income sections of society. If anyone only wants to secure the future of their loved ones after their demise, then term life insurance would be an ideal choice.
Things To Consider When Purchasing An Endowment Insurance Plan
Listed below are some of the factors that you need to take into account when purchasing an endowment insurance plan.
- Invest at an Early Age: A long investing horizon is provided by starting early investment. This helps the insured accumulate a sizable wealth over a long time. Moreover, it is easier to save systematically in endowment plans and they guarantee higher returns because of the power of compounding.
- Flexibility: The insured may select a regular payment endowment policy if they are an employee. There are single payment options available for people with irregular income.
- Bonuses: The insurance companies payout bonuses depending on the performance of the business. At the end of each policy year, an insurance provider who earns a profit from his or her investments distributes a portion of the profit.
- Enhanced Protection: Some insurance companies provide riders such as critical illness benefit riders, accidental riders, and more. You can buy these riders with your standard endowment plan by paying an extra premium to the insurance company.
- Type Of Endowment Plan: There are different types of endowment plans offered by insurance companies. Compare all the types and choose to buy the one that suits the best as per your requirements.
In conclusion, endowment plans are guaranteed savings and investment life insurance plans. Similar to other life policies, endowment plans provide a lot of features and benefits. When choosing an endowment policy, make sure that you consider certain factors like the type of endowment plan, riders, bonus payout feature, and more. You can also contact InsuranceDekho to get personalized life insurance advice.