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Things to Consider Before Purchasing an Endowment Plan

Updated On Apr 23, 2021

Endowment plans are a popular investment choice among all age groups owing to their benefit of wealth appreciation and guaranteed returns. However, one should know and consider few things before purchasing an endowment plan in order to make an informed decision which best suits your requirements and financial goals. In this article, we have listed 5 such important points which you must take into consideration before purchasing an endowment plan.

5 Things to Consider Before Purchasing an Endowment Plan

1. Your Endowment Plan’s Requirements

If you are considering purchasing an endowment policy you should know if you require this plan or not. If you are a salaried person this kind of investment strategy is built for you because an endowment plan offers dual benefits which are life coverage and savings.

In addition, if you have trouble retaining constant investments and are expected to require a lump sum in the future either for retirement, child schooling or home transactions, you should certainly consider investing in a scheme on endowment insurance.

Also Read:- Top Benefits Of Buying An Endowment Policy

2. Recognize the Right Type of Endowment Plans

When you've determined that the endowment policy is the correct one for you, the next step will be to investigate the forms that exist and how well you can optimize your investments. The broad categories are profit endowment policy and non-profit endowment policy.

Non-profit or non-profit endowment scheme, a lump sum payout shall be made on death or age, whichever comes first.Whereas the profit endowment strategy also contains many subtypes, such as Conventional profit endowment and Unit Related endowment. However, no number is legally accepted in these proposals at the outset of the program period, making them more risk-prone.

3. Do Check All the Terms and Conditions of the Endowment Plan

The benefit of purchasing an endowment plan is that it provides life coverage along with saving opportunities. Before purchasing an endowment plan thoroughly read through the terms and conditions of the insurance policy to make sure that the plan you are purchasing satisfies your insurance requirements. 

4. Do Check the Insurance Provider’s Claim Settlement Ratio

It is very necessary to choose an insurance provider with a high claim settlement ratio because the high claim settlement ratio of an insurance provider depicts the credibility of the insurance provider towards its customers. Claim settlement ratio of the insurance company shows the number of claims paid against the number of total claims received.

5. Check Benefits Such As Policy Loan and Partial Withdrawals

Most of the endowment plans offer additional benefits like partial withdrawals and policy loans. You must always check if your endowment plan provides for such benefits. Policy loan is generally available after the payment of at least 2 years’ premiums and the facility of partial withdrawal generally becomes active after the completion of the lock-in period of the plan.

You May Also Like to Read:- How Endowment Plans Help To Meet Your Financial Goals?

All You Need To Know About An Endowment Policy

Take Away

An endowment plan is a great investment solution which can help you plan for a variety of financial goals like financing your child’s education/marriage or planning for your retirement. It helps you accumulate a substantial amount without the requirement of time commitments or fund management efforts from your end. However, you should always check the above pointers before proceeding with an endowment plan in order to make an informed and calculated decision. 

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