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What Exactly Is An Endowment Plan?

Updated On Mar 17, 2022

Everyone want to live a long and prosperous life with their family. Contrary to common assumption, life insurance isn't only a doomsday plan designed to safeguard your loved ones in the event of your untimely death or disability. With the crucial assistance of an Endowment Life Insurance policy, you may even utilise a life insurance policy to insure a pleasant, fulfilled post-retirement life that you can enjoy with your entire family. Endowment plans are life insurance policies that not only protect an individual's life in the event of a tragic occurrence, but also provide maturity benefits at the end of the term. They are structured to pay a lump sum payment after a certain length of time, known as'maturity.'

What Exactly Is An Endowment Plan?

What is the Endowment Policy? 

Endowment policies are a form of life insurance policy that combines the benefits of insurance with savings. Endowment plans allow the insured to save consistently over a certain length of time in order to receive a lump-sum payment at the policy's maturity. If the insured lives to the end of the policy's term, the maturity amount is paid. However, in the event of the insured's untimely death within the policy's term, the policy's beneficiary gets paid a sum guaranteed amount as well as any bonus (if any). Aside from that, endowment policies aid in the creation of a financial buffer for the future, allowing one to satisfy both long-term and short-term financial goals.

Endowment Policies' Characteristics

The following are some of the most important aspects of endowment policy:

  • Benefits of Death and Survival: In the event that the insured dies before the policy's maturity date, the nominee/beneficiary receives the sum promised as well as any bonuses. In addition, if the insured outlives the insurance, he or she is entitled to the sum promised.
  • Increased profits: An endowment plan not only protects the policyholder's family and dependents financially in the event of the insured's untimely death, but it also helps develop a future corpus. An endowment plan's payment can be substantially bigger than that of a standard life insurance policy, whether it's the survival benefit or the death benefit.
  • Premium Payment Frequency: Depending on the insurance selected, the policyholder can make regular, single, or restricted premium payments. You may also opt to pay in annual, half-yearly, quarterly, or monthly instalments.
  • Riders: Policyholders can add riders to their plans, such as critical sickness, complete disability, and accidental death, to expand their life insurance coverage. In the event of permanent disability or catastrophic illness, a few policies additionally provide premium payment waivers.
  • Tax Benefits: Under Sections 80C and 10(10D), the policyholder is excluded from paying taxes on both premium payments and maturity or ultimate death benefits.
  • Low Risk: Endowment policies are less risky than other investment plans such as mutual funds or ULIPs since the money is not invested directly in equity funds or the stock market.

Takeaway

Endowment life insurance products offer several apparent advantages. For instance, when the endowment insurance policy matures, the policyholder obtains a savings pool. He can reinvest the money or utilise it to enjoy life after retirement. As a result, endowment policies are nearly risk-free and provide a consistent amount on a predetermined date as long as the premium is paid.  This money can also be used for monthly expenditures, your child's schooling or wedding, or even a well-deserved holiday.

Also read- Why should I choose InsuranceDekho To Purchase My Endowment Policy?

Endowment Policies - Their Advantages And Disadvantages

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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