Types of Endowment Plans
Published On Mar 15, 2021 12:00 AM By InsuranceDekho
Table of Contents
An endowment fund is a life insurance plan that offers dual incentives for life insurance and investment. You continue to pay the premium for a fixed amount of time and the benefits will be made available in the event of the death of the covered individual or after the plan has expired.
Features of Endowment Policy
Following are the key features of an endowment plan -
1. Return on Investment
An endowment plan lets you grow your corpus in the long term that helps you ensure that you and your family have enough financial resources to meet future financial needs.
2. Maturity Benefits
Under an endowment policy, if the life assured survives the entire policy tenure, he/she is paid a maturity benefit amount along with guaranteed appreciation (if any) upon the maturity of the policy.
3. Low Risk
Endowment policies are considered as low risk investment options because the money invested in these plans are not directly invested in any market linked investment tools.
4. Tax Benefits
The endowment scheme helps you to take advantage of the tax benefits provided for under Section 80C of Income Tax Act 1961. You may also use the lending facility against the regulation, as per section 10D.
Also Read:- How Do Endowment Plans Generate Returns?
Types of Endowment Plans
Let us look at the various types of endowment plans present:
1. Full Endowment Plan
As the plan begins, the policyholder is guaranteed of a basic sum that is paid in case of death. The final payment that is paid from you as the agreement matures is usually greater than the promised amount. This is due to the rise in investment and the annual bonus paid to your portfolio.
2. Low-Cost Endowment Plan
Low-Cost Endowment Funds have been developed to help the covered individual gather a fund for potential payments expected after a fixed period of time. They are usually used for the redemption of debts or mortgages. In the event of the death of the insured, the minimum amount assured shall be paid to the beneficiary.
3. Unit-Linked Endowment Plan
This is ideal for those with high risk capacity and those looking for better returns on investment. It is a fixed-term [lan that uses the premium rate for the procurement of mutual fund units. The market performance of the fund determines the final return on investment. Apart from that, it also provides the covered individual with a life-coverage.
4. Unitized for the Benefit Endowment Plan
A type of hybrid unit-linked endowment plan that balances the volatility involved with unit-linked policies. The valuation of units shall be produced annually and a minimum amount of payback shall be assured. This guaranteed amount is isolated from market risks and is thus considered a secure investment choice.
5. Non-Profit Endowment Plan
In the case of a non-profit endowment plan, the stated lump sum is due at the time of the insurance maturity or death of the insured individual, whichever happens earlier. The number remains constant and there is no extra bonus of the amount. It's right if you're really hunting for life news.
With various endowment plans available, it is prudent to recognize the advantages and related costs of each scheme under consideration. You will need to be specific on the requirements and the risk-bearing ability to pick an acceptable strategy for yourself. These endowment strategies will allow you to ensure financial security for your loved ones in the event of an eventuality.
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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.