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What Are The Primary Objectives Of Purchasing Endowment Plans?

Published On Jul 15, 2021 7:00 PM By InsuranceDekho

There are many options to pick from with the ever-increasing number of insurance plans on the market. As a result, it's critical to understand the key elements of the plan that's right for you.Endowment plans offer a lot to the table, and their conduct sets them different from other plans. Such plans combine the benefits of saving and insurance with the assurance of security. In this article, we have listed the primary objectives of buying an endowment insurance plan.

Primary Objectives of Purchasing Endowment Plans

Following are some of the primary objectives of purchasing endowment plans - 

  • Building A Saving Corpus

The fundamental element that distinguishes endowment plans from other types of plans is the dual benefit they provide. Endowment plans combine the advantages of saving and insurance into a single plan. Premiums deposited at predetermined periods assist establish a savings account that can be accessed when needed. These are long-term savings strategies that aid in the development of a safety net. Since then, endowment programmes have been established for both experienced and novice investors with a low risk tolerance. Endowment programmes are a good way to save money in the long run.

  • Insurance Coverage

As previously mentioned, endowment plans provide both savings and insurance coverage.

Endowment plans include life insurance coverage in addition to the maturity benefit, which pays out the sum assured to the concerned beneficiaries in the event of the policyholder's death.If you have financially dependent family members, it will help secure their safety and well-being even when you are not around.

  • Risk Free Alternative

Endowment plans are marketed as low-risk investments and are appropriate for investors with a low risk tolerance. These programmes do not work in a high-risk market and offer guaranteed payments. It makes the plan all-encompassing by allowing the investor who does not appreciate the thrill of the stock market to participate. 

Since the money isn't invested directly in equity funds or the stock market, traditional endowment policies are deemed safer than other investment options like mutual funds or ULIPs.

  • Customisation Of Plan Through Rider Supplements

Riders are extra benefits added to the endowment insurance plan's main framework to make it more lucrative to investors. These add-ons increase policy protection in various situations.Different riders are available depending on the insurer and can be discussed and altered while purchasing the insurance.

In an endowment policy you can choose from the following riders: 

  1. Accidental Death benefits Rider
  2. Term benefit rider
  3. Accidental Total And Permanent Disability Benefit Rider
  4. Critical Illness Benefit Rider 
  • Long Term Option

Longer tenures, up to 30 years, are possible with endowment plans. Some endowment plans can provide coverage up to the age of 100. This function is intended to assist you in achieving your long-term savings goals. It provides a long-term savings account that will be released to the policyholder's dependents or nominees in the event of the policyholder's untimely death, or will be granted to the policyholder even if the policyholder survives the policyholder's death.

  • Guaranteed Returns

Endowment plans, whether in the form of maturity or death benefits, give a higher and risk-free return. The policyholder's premium contributes to a savings account, which will earn you a substantial sum over time.

The income from an endowment plan will help your family as well as your long-term goals.

  • Maturity And Death Benefits

Endowment plans offer the maturity along with the death benefits to the policyholder: 

Benefits on Death

If the life insured dies during the plan's term, the company will pay the death benefit to the nominee as follows:

  1. The Sum Assured in the Event of Death, plus
  2. Any earned bonuses at the time of death.

The Death Benefit is limited to 105 percent of total premiums paid up to the date of death (excluding any extra premiums).

Maturity Benefit

You will receive a Maturity Benefit if you outlive your insurance term. The Maturity Benefit is made up of the following elements:

i.Sum Assured at Maturity, plus ii.Any cumulative reversionary bonuses, plus any reversionary bonuses that have accrued

iii.A bonus at the end of the year (if any).

Take Away

If you're seeking a plan that will provide you with guaranteed profits as well as a tax benefit, an endowment plan is the greatest option. It is a policy that is appropriate for people of various ages and savings capacities.The above article will introduce you to the various reasons for buying an endowment plan.

Also read 

Common Features of Endowment Insurance Plans

Endowment Plan vs Term Plan - Difference

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.         

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