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What Is The Purpose Of Purchasing An Endowment Plan?

Updated On Aug 24, 2021

An Endowment Plan is your best bet if you want coverage that provides more than simply life insurance. These plans are ideal for people of any age group, regardless of their saving ability, due to the triple benefits of long-term wealth growth, insurance coverage, and regular goal-based savings. 

Even while endowment plans have lower returns, they are significantly safer and ensure that all of one's financial and insurance needs are met in one place. During a financial crisis, an endowment plan can be a lifesaver, providing financial assistance and security to one's family both now and in the future.

Key Reasons To Purchase An Endowment Plan

These are the following reasons to purchase an Endowment plan:

  • Dual Benefit

Endowment plans combine the advantages of long-term investing and insurance into one package. Endowment plans provide a lump sum maturity amount (adjusted after considering firm performance and premium defaults) to the beneficiary in addition to paying the sum promised (or accumulated amount minus unpaid premiums, whichever is higher) in the event of the policyholder's death. Endowment strategies have a significant advantage in this regard.

  • Assured Bonus

Endowment plans generally announce an annual bonus, which is normally paid out as a percentage of the money assured. In the case of the policyholder's survival, additional bonuses collected over the policy duration are paid in addition to the sum provided. In the event of death within the policy term, the nominee receives the death benefit, which includes the whole sum assured as well as the total cumulative benefit.

  • Cumulative Returns

One of the most appealing features of endowment plans is that they generate compounding returns during the policy term.

Also read: Some Salient Features Of An Endowment Plans    

  • Flexibility At Its Best

Another significant benefit of endowment plans is that you can pay your premium over a short period of time while still benefiting from the policy's advantages over a lengthy period of time. If premium payments halt after a specific number of years, a free paid-up insurance with a smaller sum assured can be obtained - subject to certain criteria.

  • Additional Riders

Insurance firms provide customers with additional benefits and riders, such as marriage/education endowment plans and double endowment plans. An endowment plan also allows policyholders to pay a marginal premium to purchase additional riders for major surgical assistance, severe illnesses, and other things.

  • Loan Facility

Policyholders can borrow money from an endowment policy as and when they need it, usually without having to put up any security.

  • Double Tax Benefits

Endowment plans have the added benefit of providing tax benefits under Section 80C on the annual premium and Section 10D on the death benefit, according to the Income Tax Act.

  • Security

Endowment plans are risk-free in terms of the total secured, even though their returns are lower.

  • Disciplined Savings

Policyholders must set away a predetermined amount toward the premium payment at a predetermined time interval, which encourages a disciplined approach to saving.

Conclusion

An Endowment Plan is your best bet if you want coverage that provides more than simply life insurance. These plans are ideal for people of any age group, regardless of their saving ability, due to the triple benefits of long-term wealth growth, insurance coverage, and regular goal-based savings.

Even while endowment plans have lower returns, they are significantly safer and ensure that all of a person's financial and insurance needs are met in one place. During a financial crisis, an endowment plan can be a lifesaver, providing financial assistance and security to one's family both now and in the future.

Must read: 

Step by Step Guide for Purchasing The Right Endowment Plan

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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