When it comes to financial planning, the advice of getting insurance never loses its charm. Choosing the right policy seems like an arduous task. Let’s get to know more about the endowment plan here and break the mountain of doubt.
What Is An Endowment Policy?
An endowment plan is a type of life insurance policy that helps in systematic saving with the benefit of coverage. It pays the insured lump sum amount after the maturity period. In the event of the insured’s demise during the tenure of the policy, the sum is paid to the beneficiary.
The maturity period ranges from ten years to a specific age limit. Certain endowment policies even pay in the case of acute diseases. Endowment policy differs from other life insurance policies as it pays the entire sum even if the policyholder survives the maturity tenure.
Types of Endowment Plan
Unit Linked Endowment Plan
A unit-linked endowment policy is best suited for individuals with a high-risk appetite. It provides the benefit of life coverage with financial savings and has a fixed term. The premium is spread over different units in an investment plan based on the choice of the policyholder. So, the return depends completely on the market.
Non-profit Endowment Plan
This offers the policyholder a guarantee of returns. The policyholder gets the sum assured on maturity. in the case of his/her death, the amount is paid to the beneficiary as the death benefit
Full/With Profit Endowment Plan
In this, a basic sum assured is given to the policyholder. The amount is guaranteed at the time of purchasing the policy. The insured even get bonuses making the final payout bigger. The bonus can be given irrespective of death or maturity.
Low-Cost Endowment
If a person wants to accumulate funds for the future, then a Low-cost endowment plan is the one. Usually, this plan helps in saving money for repayment of loans. If the policyholder dies during the plan’s tenure, the beneficiary receives a minimum sum assured.
Features of the Endowment Plan
Flexible-Premium
An endowment plan gives you the option to choose the premium payment frequency, i.e., monthly, quarterly, half-yearly, or yearly. The policyholder can also choose to pay single or regular premium payments as per his/her feasibility.
Survival and Death Benefits
The policyholder receives the sum assured after the end of maturity tenure. Similarly, the beneficiary is entitled to receive the bonus along with the sum assured in the event of the policyholder’s demise.
Flexibility in Cover
A policyholder can get additional insurance by enhancing the base plan in critical illness, accidental death, or disability. This extra cover is known as riders. The insured is required to pay a bit extra than the regular premium.
Low-Risk Investment with High Returns
An endowment plan is safer than other investments such as ULIP or mutual funds. Also, The payout is much higher than a standard life insurance policy.
Tax Benefits
A policyholder can claim an exemption under Section 80C and Section 10(10D) for premium payment and maturity payout, respectively.
In all, an endowment plan not only secures a person financially but also provides life cover. With so many benefits, it’s hard not to invest in an endowment plan.
