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Things You Need to Know Before Buying an Endowment Policy

Published On Nov 04, 2021

Endowment plans help you build the required corpus through regular savings, thereby helping you meet your long term financial goals. With a reliable endowment policy, you can decide to buy real estate, save for your child’s education, or plan for your retirement. Also, in case you have financial dependents, then it may create a financially stressful situation for them in case of your absence. Hence, it is important to have an endowment policy to cope up comparatively easily in case of misfortune events.  

However, there are several things that you need to consider when buying an endowment policy. Read them below: 

1. Begin Planning Early

When it comes to buying an endowment policy, it is always recommended to buy it earlier, as it offers greater benefits in that case. It will help you build a corpus and save money.

2. Select a Policy With Riders

Riders are additional benefits that you can buy at the time of policy purchase by paying an extra premium. Riders offer additional coverage and hence you must consider including it in your endowment policy. 

3. Check For Flexibility Option

Insurance companies offering endowment plans offer flexible options. For example, if an individual is salaried, then he/she can select a regular endowment policy. But in case an individual has irregular income, then he/she may opt for either a single payment option or a limited premium payment option. 

4. Guaranteed and Non-Guaranteed Returns

Not only do endowment plans offer low-risk insurance as well as the dual benefit of death cover, but many of them also offer a combination of guaranteed and non-guaranteed returns. Guaranteed returns remain fixed, and are paid on maturity or death, whereas non-guaranteed returns consist of bonuses that are variable in nature and depend on the investment performance.      

  1. Bonuses: Insurance companies offering endowment plans declare bonuses that depend on how the company has performed. When the insurance company makes profits from its investments, then it may distribute a part of it to the policyholders when a financial year ends. Also, the profit earned by an insurer depends on the valuation of its assets as well as liabilities. 

Bottom Line

Now that you know what you should look for before buying an endowment policy, you must also know the right circumstance to buy it. It is recommended to buy an endowment policy as soon as you have a steady flow of income. This will help you manage premium payments without any hassle. Also, buying early keeps you invested for a longer period of time, thereby being able to build a larger corpus. So, invest in an endowment policy early, as per your requirements, by considering the points listed above.  

Also read - How To Buy the Right Endowment Plan?

Benefits Of An Endowment Policy Which Makes It A Must Have

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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