Compare & Buy Car, Bike and Health Insurance Online - InsuranceDekho
Claim, renew, manage & moreLogin

Understand How Endowment Plans Can Act As An Investment Component

Published On Dec 08, 2021

Simply explained, an endowment plan is a life insurance contract that pays out a lump sum after a specified period if the policyholder dies. If the policy term expires while you are still healthy, you will receive the entire value. This money can be used for anything you wish, including your children's schooling, retirement, or home purchases.

The saving factor is the most important message here. Your premiums are collected and returned to the policyholder (either you or your family) after the insurance term in an endowment policy. As a result, it serves as a savings vehicle as well as a life insurance policy.

An endowment plan is an investment vehicle purchased from a life insurance provider. It provides a future reward without any of the interest rate or investment risks that come with it. In an endowment plan, a medical checkup is not required, as it is in most life insurance policies.

Understand How Endowment Plans Can Act As An Investment Component

Below are a few components you must understand to know how Endowment Plans can act as an investment component:

  • Guaranteed Returns

Endowment policies are minimal investments that provide modest yields. It has a life insurance payout as well as an investment component. These plans provide guaranteed returns upfront and therefore are not affected by the performance of the market. Assured returns, such as guaranteed additions, are predetermined and distributed only upon death or maturity (as applicable).

  • Bonus

Based on the skill of the assets, the insurance firm frequently awards incentives. At the end of every financial year, an insurance provider transfers a portion of its profits to its members. After valuing its financial assets, a term life company's profits or surplus is calculated.

Simple Reversionary Reward and Terminal Reward are appended to the sum assured in an investment plan and are paid upon death or maturity. Periodically, a Simple Reversionary Bonus is issued and accumulated for payment upon death or maturity request. A terminal incentive is a form of retention bonus that is paid only when the policy reaches its maturity date.

  • Long-Term Financial Planning

Whenever you keep endowment insurance for a long time, it will pay off handsomely. The advantages of an insurance endowment plan are only paid out in the event of death or maturity. It's not a good idea to surrender the insurance because you'll only get a small payout. You must select an insurance term that will assist you in conserving money and achieving your financial goals.

  • Buying An Endowment Plan In Specific Circumstances

If you have a stable stream of income and want to save for your family's future goals. You can try to develop a corpus by investing in an investment plan.

You can fulfill many financial commitments for your family by using the savings option. It also provides financial protection by paying your family the sum assured amount in the event of your death.


An endowment approach has both a term life component and the ability to save. It helps in saving money by providing incentives or assured enhancements to your coverage. If you have life insurance, you don't have to worry about your family's financial prospects if you pass away. As a consequence, it's a method that's a must-have. All you must do is look up the characteristics, benefits, and prices of endowment programs on the internet, and then choose the one that best fulfills your investment goals.

Also read: 

Here's What You Need To Keep In Mind Before Buying Endowment Policy

Types of 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.

Popularly Opted Term Insurance Sum Assured

People Also Read

Must BuyMust Buy

Why to Buy Life Insurance Policy Online from InsuranceDekho

  • Tax benefit upto 1,50,000*
  • Claim support everyday 10AM-7PM
  • 50 Lacs+ happy customers
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.
Find the right life insurance for you
By clicking, I agree to *terms & conditions  and privacy policy.