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Tips To Purchase A Right Endowment Policy For Yourself

Updated On Sep 28, 2021

Do you automatically think of insurance policies that have no investment value and no liquidity for the policyholder when you think of insurance products?

We understand that most life insurance policies are only useful to the beneficiaries after the policyholder has passed away. However, for your own financial objectives, a classic endowment plan may be of interest.

Because it's so convenient and has been around longer than other investment approaches, an endowment plan doesn't get much credit. You might be shocked to learn that under this category, you can obtain the benefits of insurance as well as the benefits of a savings plan. A savings plan is one that allows you to pay regular premiums and earn fixed compounded returns, with the end result being that you or your nominees receive even your purchase price, i.e., your premium.

In a nutshell, it's a wealth-building investment. What if we told you that you could invest while also being assured? There are such policies!

Tips To Purchase A Right Endowment Policy For Yourself

Here are a few tips to purchase the right endowment policy for yourself:

1. Plan Your Familial Duties

In the event of a tragedy, an endowment fund will provide for your family. Even if your death occurs during the payment schedule or before the plan matures, the sum assured will be paid to your pre-disclosed beneficiaries. Certain insurance companies, on the other hand, may have a three- to a five-year payment schedule that must be adhered to. You'd have to check with your service provider for more information.

2. Financial Planning After Retirement

The endowment program provides the policyholder with a lump sum payment at the end of their insurance duration. You might then put the money into other investments or simply use it to live a financially secure retirement.

3. There's A Need For Life Insurance

Before choosing an endowment plan, you must first evaluate how much life insurance you require. At the very least, you should be able to cover 20 times your annual salary. For example, if you earn ten lakh rupees per year, you should get a plan with a coverage of two crore rupees.

Your life insurance needs are determined by a variety of factors, including your financial goals (both short and long-term), liabilities, and dependents. This online calculator can assist you in determining the amount of life insurance you require.

4. Premium To Be Paid

Endowment plans, in contrast to pure term policies, charge a higher premium for the same amount of life insurance coverage. This is because the assurer invests a portion of the premium in tax-advantaged investments. As a result, before purchasing endowment insurance, it's vital to understand the premium you'll need to pay in order to reap the benefits. Because the premium is higher, it must be affordable based on your current income and expenses. You can compare endowment plan premiums online before making a selection.

Conclusion

If you are a spendthrift who spends a lot of money without planning ahead of time, an endowment plan might be right for you. The rationale for this is that an endowment plan allows for more disciplined long-term investments. Investing in an endowment plan is quite beneficial, especially for people who have a steady stream of income.

Also read - Best Endowment Plans In India

Terms And Conditions 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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