What Really Is Endowment Policy?
Published On Feb 01, 2022 10:00 AM By InsuranceDekho
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Based on their financial circumstances, each individual demands a risk-free, assured investment. As a result, endowment plans should be purchased to cover three areas: first, protecting and providing financial stability for loved ones, second, achieving a financial goal, and third, saving for long-term investment goals. If you wish to get a regular premium plan, you should do so only if you have a steady source of income that you can use to pay the premiums on a regular basis. Endowment plans are favorable since they are long-term investments with better returns over time. One of the most compelling reasons to put money into an endowment plan is that it allows you to save money in a systematic way to meet your long-term financial goals. This plan also includes life insurance and the ability to construct a savings account for a more secure future.
What is an endowment policy and what are the advantages of purchasing one?
The following are some of the reasons why an endowment plan should be considered:
1. The Advantages of Death and Maturity
An endowment plan is a one-of-a-kind investing choice since it pays you a maturity benefit if you live long enough to see the policy expire. Furthermore, as a death benefit, your nominee will get the sum assured as well as other benefits if you die within the policy period. As a result, depending on the conditions, endowment plans may provide both death and maturity benefits.
2. Adaptability of Coverage
With an Endowment plan, you can have flexible coverage. Additional benefits, such as rider benefits such as accidental death and disability, critical illnesses, and so on, are available for purchase. The scope of your Endowment policy would be substantially increased if these riders were included in it. However, it would increase the premium on the policy to some extent.
3. Flexible Premium Payment Options
Endowment Plan insurance providers often offer premium payment terms that are flexible. You have the option of paying your policy premiums whenever it is convenient for you. This payment frequency can be monthly, quarterly, or even just a one-time lump sum payment.
4. Added Value
The actual maturity benefit of an Endowment plan would be bigger than that of any other regular life insurance policy without the bonus since the Endowment plans have the opportunity of collecting additional bonuses. The advantages are larger because, in addition to the sum promised, various extra amounts are payable.
5. Tax Benefits
Endowment policies offer tax benefits since the premium is deductible under Section 80C of the Income Tax Act. Under the rules of a section of the Income Tax Act, the maturity benefits acquired through Endowment plans are likewise tax-free if the sum assured is at least 10 times the monthly premium. Furthermore, although if Endowment policies offer high returns, incentives, and other benefits, the returns are not adjusted for inflation.
Endowment plans are purchased for a lengthy period of time, there is a chance that the final return earned after the policy term will not have the same real value as the original investment owing to inflation. In addition to these fundamental qualities, endowment policies offer the option of converting the insurance to a paid-up policy. You can also use your Endowment policy to borrow money. To get these benefits, you must pay the policy premium for a minimum amount of time and confirm with your insurer that your policy has such a provision.
Also read- What's Better For Me Endowment, Money Back Or ULIP
5 Common Questions Asked About Endowment Plans
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.