What is Endowment Policy? Check the benefits
Updated On Oct 03, 2023
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Endowment plans are a type of life insurance plan that also doubles as an investment vehicle. These insurance cum investment plans are set up to pay out in one of two situations:
- When the assured person passes away
- When the policy matures/comes to the end of its term
As a result, life insurance combined with endowment savings provides both a savings plan and financial protection for your beneficiaries. It's more adaptable than a traditional life insurance policy because of this. Some people may find standard life insurance policies to be too restrictive. This is due to the fact that they only payout if you die, and only your loved one’s profit.
Furthermore, you and your family will not receive the money if you do not die during the policy's term. Whole life insurance overcomes this, albeit at a cost.
In contrast, an endowment life insurance policy allows you to immediately benefit from your assets.
If you die during the policy's term, your beneficiary receives payment. If the policyholder is still living when the plan matures, they will receive a cash lump amount. This is due to the fact that premiums are used to fund retirement plans.
Understanding Endowment Plan With An Example
Below are a few things to understand about Endowment assurance plans:
1. Maturity Benefit
You can get access to the maturity value when the insurance matures or expires. This is the total amount you've accumulated during the policy's lifetime. This varies based on the performance of your investment.
Depending on the terms of your insurance, the maturity value will be estimated or guaranteed. Ten, fifteen, or twenty years is the average maturity time. They frequently have an upper age limit, and some will pay out if you get sick.
2. Benefit Of Investment
Investing in endowment policies has a number of benefits. Among them are:
- Assisting you with future financial planning. For example, you may utilize this to enhance your retirement pension.
- They have a life insurance policy built in. If you pass away within the policy's term, your family will be financially supported.
- You might be eligible for a bonus depending on the characteristics of the policy you select. If investors are successful in their investments, this will happen.
- Customers who purchased endowment policies received tax reductions on their premiums up to 1984. Life Assurance Premium Relief was previously known as this, however, it is no longer available.
3. Is The Endowment Plan Good?
If you have a considerable amount of money to save, an endowment policy plan can be a sensible investment. For instance, to pay off your mortgage, you might wish to save for ten years. Creating a policy can assist you in accomplishing this.
It's an excellent choice for individuals who don't mind the fact that the exact amount they get back is dependent on the investment's success.
4. Is It Possible For Me To Sell My Endowment To A Company?
You have two choices if you want to discontinue paying for your life insurance endowment. You have the option of cashing in your life insurance investment or selling your endowments to a third party. Traded endowment policy (TEP) companies are these third parties.
When you sell your life insurance endowment, it becomes the buyer's property. They are responsible for paying the payments, and when the endowment life insurance matures, they will receive the proceeds.
Selling endowment policies to a third-party company is usually preferable to canceling your plan with your endowment provider. The truth is that you're more likely to obtain more money for traded endowment insurance than you are for surrendered ones.
A life insurance provider might offer you an endowment policy, which is a sort of investment. You put money in each month for a specified amount of time, and it is invested. The policy will pay you a lump sum at the conclusion of the term, which is normally between 10 and twenty-five years.
Many of these products now have a life insurance component, which means that if you die before the term ends, a beneficiary will receive the lump sum.
You may also like to read - Which Are The Best Endowment Plans In India Right Now?
Disclaimer: This article is issued in the general public interest and is 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.