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Things You Must Know About Endowment Policy

Published On Aug 15, 2021

An endowment policy provides life cover along with the opportunity to save your money to grow your corpus. The life assured can regularly over a certain period of time and accumulate a significant amount that you can enjoy at the time of policy maturity. If the life assured survives the policy term, they will receive a maturity benefit as a lump sum at the end of the policy term. Under an endowment plan, in case of an unforeseen demise of the life assured during the policy term, a death benefit shall be provided to the beneficiary. An endowment policy is a good choice that can help the life assured to meet his/her financial goals. 

Different Types of Endowment Policies

Following are the different types of endowment policies:

  • Unit-Linked Endowment Plan: Under unit-linked endowment plan the premiums paid towards the endowment policy is used in 2 parts, one part is invested in different market-linked investment options and the remaining part is invested for the life cover. 
  • Full Profit Endowment Plan: Under full profit endowment plan as promised a sum assured is provided at the time end of the policy term. However, the maturity benefit may be higher than the sum assured and the insurance provider may declare bonuses upon the policy. 
  • Low Cost Endowment Plan: For a low cost endowment plan, the premiums are usually low and the life assured is able to accumulate funds which are provided after a certain period of time. The yearly bonuses also help the life assured to grow a corpus. 
  • Non-Profit Endowment Plan: Non-profit endowment plans are non-participating i.e. these plans do not participate in the insurance company’s profit. Such plans provide guaranteed additions. 

Benefits and Features of an Endowment Policy

Below mentioned are some features and benefits of an endowment policy:

  • Provides financial security to family of the life assured under difficult circumstances.
  • Endowment plans provide maturity benefit at the end of the policy term
  • This type of plan provides higher return on investment
  • Under this plan the life assured has the flexibility to choose the premium payment frequency/mode
  • There is no involved under the endowment policy
  • The life assured has flexibility to choose additional coverage with the plan, the additional coverages are also known as riders. 
  • The life assured can avail tax benefits 

Who Should Purchase an Endowment Plan?

A person who is the primary breadwinner of his/her family, can choose to purchase an endowment policy. A person who has a regular source of income and takes the responsibility of their loved ones can invest in an endowment plan. If you are a salaried professional, self-employed or businessman then you can consider purchasing an endowment policy to financially secure your and your loved ones future. With the right endowment policy, you need not worry about anything to gain returns. 

How to Buy the Right Endowment Policy in India?

Before purchasing an endowment policy you should consider a few things to buy the right endowment policy. You consider your income, outgoings, existing debts, risk appetite and expenditure. 

Must Read: Difference Between Term Plan And Endowment Plan

Exploring The Returns of An Endowment Policy

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.

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