Understand Why Endowment Policies Are Unique From Other Life Insurance Policies
Updated On Feb 04, 2022
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Before we go into the differences between term and endowment plans, let's start with the foundation, In Life Insurance you make a yearly payment to them. They provide financial security to your family in the event of your death. You put in a little additional cash. They lavish you with extra life insurance in the shape of extra perks. The policies may differ from one insurer to the next. However, the fundamentals are the same for all. Purchasing a life insurance policy provides you with the option to protect your loved ones from financial loss in the event of an unanticipated catastrophe in your life.
Endowment Plans combine life insurance and savings into one convenient package. It's a traditional life insurance policy that's been extensively acquired. It is better suited to folks with fewer financial difficulties. If you desire death benefits and wish to save and compulsorily harvest some survival returns, here is the place to be. If that's the case, an endowment plan is ideal for you. However, the entire objective of 'life cover' is weakened because premiums are exorbitant and the sum promised paid at the moment of death or survival maturity is relatively small. Regardless, the decision to invest in an endowment plan is solely yours.
Endowment Plan Features That Makes It Unique From Life Insurance
1. Benefits of Death and Survival: In the event of the insured's death, the policy's beneficiary/nominee receives the sum assured as well as incentives. In addition, if the insured outlives the insurance, he or she is entitled to the sum assured.
2. Higher returns: An endowment policy can help you develop a future corpus while also providing financial security for your family. An endowment plan's payout for survival and death benefits is higher than that of a pure life insurance policy, such as Term Plans.
3. Premium payment frequency: The policyholder can pay the premium according to the policy he or she has chosen. Monthly, quarterly, half-yearly, and yearly payments are available.
4. Flexibility In Cover: Riders such as critical sickness, total permanent disability, and accidental death can be added to the base plan to increase the life insurance coverage. In addition, a few plans give premium payment waivers in the event of total permanent disability or serious sickness.
5. Tax Benefits: Under Section 80C and Section 10(10D) of the Income Tax Act of 1961, the policyholder is eligible to a tax exemption on premium payments, maturity, and final payouts.
6. Low Risk: Traditional Endowment Policies are believed to be safer than other investment options such as Mutual Funds or ULIPs because the money is not invested directly in equity funds or the stock market.
The goal of the insurance policies is to keep your family protected when they need it the most. As a result, you should not rely on this as your sole source of investment or savings. However, the policyholder must benefit from both term and endowment insurance plans based on their financial goals. Market experts feel that insurance should not be mingled with other types of investments, giving unfiltered solutions like term insurance plans an advantage over endowment plans. Endowment plans invest policyholder funds in a variety of instruments and charge higher premiums in order to provide insurance and large savings. Similarly, these plans deduct charges from the death benefit, among other things, and return the balance to the policyholder when the policy matures. If you want to benefit from the protection, it's best to go for an unfiltered term insurance plan.
Also read- Understand The Concept Of Endowment Plans
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.