Why is an Endowment Plan Considered as a Great Idea?
Published On Jul 23, 2021
Endowment Policy is one of the most popular insurance plans in our country. Endowment plan acts as a life jacket to all those individuals who wish to get a lump sum of money after a certain period of time and at the same time who wants to save a particular amount of money in regular intervals.
For instance, Mr. A, aged 20 years, decides to take up an endowment plan. He wants to get the assured sum at the age of 40. Therefore he takes up an Endowment plan featuring a 20 year term which gives an assured sum of Rs. 5,00,000. His annual premium amount is Rs. 22,000. He has liberty to choose the mode of payment i.e., if he wants to pay the premium monthly or quarterly or bi-annually or annually or even one-time payment. On the maturity of the policy, the assured sum is paid to the policyholder along with the bonus accrued.
Advantages of Investing in an Endowment Plan
One must know the benefits of an Endowment Plan, before opting for it.
Here are few advantages of the Endowment Policy:
1. Bestows Life Cover: Nobody can predict what happens in the next moment. Life has many twists and miracles awaiting for every person. Securing your life with a life insurance policy is like preparing for unforeseen situations. The loss of the breadwinner of the family has an extreme effect on its survival. The endowment policy pays the sum assured to the nominees of the policyholder incase of his/her life loss.
2. Promotes Disciplined Savings: We often encounter people who expend a lot on things which are not actually necessary for them. Furthermore, inculcating saving habits strengthens our financial position. The endowment Policy requires a person to pay the premium either monthly, quarterly, bi-annually or annually, according to the terms and conditions of the policy. These premiums which are paid on time ensure that you receive the assured sum at the time of the maturity of the policy.
3. Provides Loan Facility: An endowment plan enables the policyholder to take a loan against the Policy , whenever needed(mostly without a collateral security).
4. Perks on Tax Payment: The premium paid for the endowment plan is exempted from tax payment under the Section 80c of the Income Tax Act, 1961. Section 10D provides to exempt the death benefit amount.
5. Offers Bonus: Another alluring benefit of this plan is that it offers a good amount of bonus to the policyholder. The bonus is given out as a percentage of the sum assured. On the maturity of the policy period, the policyholder gets to enjoy both the sum assured and the bonus accrued during the term. If the person fails to survive throughout the policy period, the assured sum along with the accumulated bonus is issued to the nominees of the policyholder.
6. Provides Add-on Riders: The endowment plan supports additional benefits to the policyholder. These benefits include marriage endowment plan, education endowment plan and double endowment plans. Additional riders for critical illness and surgical assistance, is also offered by the insurance companies.
7. Fosters Safety: The endowment plans are risk free and are suitable to the persons who prefer risk aversion. However, the returns on the endowment plans are lower.
8. Supports Your Long Term Objectives: Endowment plans are perfect for those people who plan to build a new home after a few years or to those who want to go for a long holiday , as they provide a lump sum of amount including the bonus accrued (if any). They can be useful to pay for your children's higher education or for buying a new vehicle.
The endowment plans are very beneficial for individuals as they provide dual benefits of both saving for the future and securing your life with an insurance cover. It has a good number of advantages. The ultimate decision to take up a policy lies in the hands of the individual. Therefore one must be aware of all the terms and conditions of any policy.
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.