Why Should I Consider Investing in an Endowment Policy?
Updated On Jan 26, 2022
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An endowment plan is a lifesaver for people who have trouble saving money for a rainy day or who buy stuff they don't need on a regular basis. An endowment plan is a type of life insurance policy that functions similarly to a savings account, paying out a lump sum of money when the policy matures or the policyholder passes away. It's essentially a hybrid of an investing and a risk management strategy. An endowment plan protects the guaranteed person's life while also supporting the policyholder in saving consistently over the course of the policy's life. Prior to the policy's expiration date, an endowment plan can be withdrawn, with the policyholder receiving an amount decided by the insurance provider.
Advantages of Purchasing An Endowment Plan
The following factors should be considered while selecting an endowment plan:
1. Risk Protection
In the event of a tragic incident, endowment plans provide beneficiaries with a lump sum death payment. As a result, in the case of a financial emergency while you are abroad, your family will be financially secure.
2. Advantages of Maturity
The assured maturity benefit is paid if the policyholder lives to the end of the policy term. The lump-sum payment enables you to meet both long- and short-term financial obligations and objectives.
Risk-free endowment life insurance policies have no investment or interest rate risk. Low-risk investments, on the other hand, usually offer modest returns. To put it another way, you won't be able to save enough money to cover the cost of your education. Your money may not even keep up with inflation because the earnings on endowment life insurance contracts are taxed.
4. Benefits from Taxes
Endowment insurance is eligible for tax benefits under Section 80C of the Income Tax Act of 1961. This clause allows for tax deductions on endowment programme premiums. When your policy matures, this clause also allows you to save money on taxes.
5. Benefit of Lifetime Coverage
Extended Life Coverage can be added to a policy at the outset by paying an additional premium over the policy's premium-paying term.
6. Advantages for Riders
Endowment plans, like term insurance policies, include added benefits including critical illness coverage, accidental death benefit coverage, and premium waiver coverage, among others.
7. Death benefits
Death benefits are also part of endowment schemes. The sum assured, on the other hand, may or may not be sufficient to meet the financial demands of your loved ones.
8. Guaranteed Benefits
If the Life Assured survives that period and all premiums have been paid on time, you will get a Survival Benefit of 50% of the Sum Assured one year before the policy term expires, and a Sum Assured on Maturity benefit at the end of the policy term.
When endowment policies mature, policyholders are guaranteed a dividend. This endowment insurance can be used to cover a wide range of expenses, including paying for children's education and marriage. An endowment policy can also be used to build a retirement fund or to buy a house. The assurer pays the entire money pledged (plus any extras, if any) to the policyholder's nominee in the case of the policyholder's untimely death. As a result, the policyholder's family's financial situation is unchanged.
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.