Why You Must Not Avoid Endowment Policies?
Updated On Sep 14, 2021
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Your money seems to vanish from beneath your nose, no matter how hard you work! It's almost as if you put your hard-earned cash in a special bag with no bottom – because no matter how hard you work, it's never enough!
Inflation and rising living costs reduce most of your income yet you still have to pay for necessities like your children's schooling, household expenses, and groceries. You are willing to work 24 hours a day, but you are still left with multiple unfulfilled aspirations and insufficient funds at the end of the day.
It's time to quit worrying and start doing something about it. It's time to investigate the 'endowment plan,' a valuable insurance package. An endowment policy is a type of insurance that combines life insurance with the opportunity to build wealth via systematic savings. It encourages policyholders to save money on a regular basis so that they might accumulate a big sum of money in the future. There is also the possibility of long-term capital growth.
Reasons Why You Must Not Avoid Endowment Policies
Below are a few reasons why you must not avoid Endowment Policies:
1. Dual Benefit
Endowment plans bring together the benefits of long-term investment and coverage in one convenient bundle. Endowment plans to charge a lump sum maturity amount (adapted after contemplating the performance of the company and high-quality defaults) to the beneficiary if the policyholder survives the policy tenure, as well as the sum assured (or aggregated amount minus outstanding premiums, whichever is higher) if the policyholder dies. In this aspect, endowment schemes have a substantial benefit.
2. Assured Bonus
Annual bonuses are usually offered as a percentage of the money secured in endowment systems. Additional bonuses accrued over the policy's duration are compensated on top of the sum provided in the event of the policyholder's survival. The nominee receives the death benefit, which includes the entire sum assured as well as the total cumulative bonus if the policyholder dies within the policy period.
3. Disciplined Savings
Policyholders are required to set aside a predetermined amount for premium payment at a predetermined time interval, promoting a disciplined attitude to saving.
Even while endowment plans have lower returns, they are risk-free in terms of the amount guaranteed.
5. Compounding Returns
Endowment plans offer the benefit of compounded returns over the life of the insurance.
6. Access To A Loan
Policyholders can borrow against such an endowment policy at any time, and the loans are generally not secured by collateral.
7. Double Tax Benefits
According to the Income Tax Act, endowment plans have the capability of giving tax benefits under Section 80C on the annual premium and Section 10D on the death benefit.
8. High Liquidity
Endowment policies have a high level of liquidity.
9. Premium Flexibility
Another significant benefit of endowment plans is that you can pay your premiums over a short period of time while receiving long-term insurance benefits. If premium payments end after a specified number of years' worth of payments, a free paid-up insurance with a smaller sum assured can be obtained - subject to certain criteria.
10. Riders And/Or Other Benefits
Additional perks such as marriage/education endowment plans and double endowment plans are available from insurance providers to policyholders. Endowment plans also let policyholders pay a marginal premium to purchase extra riders such as major surgical help, severe illnesses, and so on.
An Endowment Plan is your best bet if you want coverage that provides more than simply life insurance. Due to the triple advantages of long-term wealth creation, insurance coverage, and regular goal-based savings, these plans are appropriate for people of any age group, regardless of their saving abilities. Even while endowment plans have lower returns, they are much safer and allow a person to meet all of their financial and insurance needs in one spot. An endowment plan can be a lifeline during a financial crisis, offering financial help and stability to one's family both now and in the future.
You may also like to read - Features Of An Endowment Plan You Must Know About
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.