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Understanding Endowment Policy And The Right Time To Buy It

Updated On Sep 13, 2021

An endowment policy combines life insurance and savings into one package. It helps you save money on a monthly basis over a certain length of time so that you can get a lump sum payment at plan maturity if the covered person lives longer than the policy term. According to the policy's terms and circumstances, the insured person receives their guaranteed money at a future period.

While an endowment plan has many benefits at any age, purchasing one at a young age might give you additional benefits. The best time to buy an endowment plan is in your late twenties or early thirties. You should always purchase an endowment plan when you are young since you will have fewer responsibilities than when you are in your mid-30s or early 40s. Aside from that, beginning to invest in an endowment plan at a young age will help you create a corpus for the future and provide financial security to your family or loved ones. The final payoff for the mortality benefit and survival advantage of an endowment policy is bigger and more uncommon than the benefits obtained in a traditional term plan, such as a life insurance policy.

Endowment Policy: Everything You Should Know

The following are few things You need to know about Endowment policy:

1. Tax Advantages

One of the most important characteristics that make an endowment plan a smart investment option is that you can always enjoy tax exemptions on the purchase and payment of premiums.
Sections 10 (10D) and 80C of the Indian Income Tax Act, 1961 exempt the premium paid on endowment plans, as well as the maturity sum and final distributions.

2. Low To Moderate Risk

According to current endowment trends, this endowment plan is a safer and better investment alternative with low to moderate risk. The fact that endowment plans do not invest directly in the stock market or equity funds like mutual funds is the major reason for their moderate risk.

3. Higher Investment Returns

In the event of the policyholder's sudden death, an endowment plan provides financial stability to the policyholder's dependents and loved ones, as well as assisting in the creation of a larger corpus for future requirements. The returns on investment in an endowment plan are significantly better than the standard life insurance plan, whether it is the mortality benefit or the survival benefit.

4. Flexibility In Coverage

Aside from basic endowment coverage, the insured individual can choose from a variety of add-ons and rider benefits on the standard base plan, such as critical illness coverage, accidental death benefits, or total and permanent disability coverage.

Conclusion

If you are the sole breadwinner in your family, an endowment plan is a necessity. Anyone with a consistent source of income and the responsibility of raising their loved ones and meeting their requirements must invest in an endowment policy.

If you are a regular salaried professional or a businessperson, or if you are self-employed, you can purchase an endowment plan. With the right endowment policy in place, you won't have to risk a lot of money to get excellent returns on your assets.

Also read - Is Purchasing An Endowment Policy Beneficial?

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