Reasons To Purchase An Endowment Plan
Updated On Apr 23, 2021
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Endowment plans not only provide life cover but also act as an investment tool. These plans provide sum assured in case of an unfortunate demise of the life assured or at the time of plan maturity. Endowment plans also offer wealth appreciation. Other than these benefits that you avail under an endowment plan, there are more good reasons to invest your money in an endowment plan. Read below to understand why you should purchase an endowment plan.
Also Read:- Features Of An Endowment Plan
Reasons To Purchase An Endowment Plan
Following are some reasons why an endowment plan is a good choice to invest your money into:
1. Serves Dual Purpose
Endowment plan is a type of life insurance plan. This type of plan serves the dual purpose of providing life insurance cover and long-term investment benefit. This means that the life assured can enjoy the benefits of a life insurance policy with an opportunity to grow his corpus that can be accumulated when the time calls for it.
2. Risk-Free Returns
Returns from endowment plans are low but they are considered risk free. Endowment plan returns are risk-free. Endowment plans offer guaranteed returns after a specific period of time, as long as premiums are paid regularly and these returns are risk-free.
3. Death and Maturity Benefit Payout
As endowment plan is a type of life insurance it offers death benefit payout. The death benefit is payable to the nominee in case of an unfortunate demise of the life assured. Other than death benefit payout, if the life assured survives the entire policy term, he/she is entitled to receive a maturity benefit at the time of plan maturity. The life assured can choose to receive the maturity benefit as a lump sum amount or as a way of regular income
4. Additional Income Benefit
Under an endowment plan you can avail the benefit of receiving additional income. You can avail the benefit of receiving an annual bonus that is declared upon your endowment plan. These annual bonuses can be equivalent to the pre-decided percentage of the sum assured. This annual bonus amount is paid at maturity along with the maturity benefit. In case of an unforeseen demise of the life assured the nominee will receive the annual bonus along with the death benefit.
5. Tax Benefits
An investment in an endowment plan qualifies for a tax deduction of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act. Also, the proceeds realised from it are tax-exempted under Section 10(10D) of the Act if the premium paid is at least 10% of the sum assured or the sum assured is a minimum of 10 times of the premium.
6. Option to Enhance Coverage
Endowment plan offers life insurance coverage along long-term investment opportunity but you can also enhance your life insurance coverage with riders. Riders can be purchased along with a base life insurance policy to enhance the coverage under it. Common life insurance riders offered by insurance companies are Accidental death benefit, Accidental permanent disability, Total & partial disability benefit, Hospital cash benefit, Waiver of premium benefit, Critical illness benefit, etc.
Conclusion
Endowment plan is a blend of life insurance and investment tool. Other than serving the dual purpose endowment plan can be very useful for people who want to grow their corpus for future financial requirements. Wealth appreciation from endowment plans can act as an additional income to help you achieve your financial goals. Endowment plans are a good choice for investment.
You May Also Like to Read:- Term Insurance And Endowment Plan: 5 Major Differences
