Endowment Plan: What you don’t know about its benefits can change your life

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Endowment plans have similar characteristics like life insurance, apart from the fact that endowment plans provide you with the combined benefits of both – insurance and investment. It’s a double-benefit plan for you that provides a guaranteed sum on maturity and your unfortunate demise to your dependents.

The policy provides you with a lump sum amount of money in both the former-mentioned aspects. On top of that, it also provides you consistent and periodic payments to help you enjoy the benefits of this endowment policy while you’re alive. If you manage to pay the premiums regularly for a certain period, you can enjoy several applicable bonuses and additions along with the assured sum accrued during the term of your plan. It’s ideal for encouraging disciplined savings as well.

Benefits of Endowment Plans

1. Regular Savings

During the tenure of this policy, you need to pay a specified amount in the form of regular premium payments in specified timeframes. This encourages an approach to savings as well as living a disciplined and financially stable lifestyle.

2. Riders and Additional Benefits

A lot of insurance companies offer endowment plans along with several additional benefits such as double endowment plans and marriage endowment plans or education endowment plans. Moreover, you can also choose from numerous riders such as critical illness and surgical assistance.

3. Guaranteed Bonuses

With every endowment policy, you can avail an annual bonus that’s paid as a percentage of the assured sum, depending on the size of your contract. Additionally, if you live throughout the tenure of the policy, you can receive additional bonuses along with the assured sum.

In case of your unfortunate and untimely demise, the death benefit along with the complete assured sum will be paid to your selected nominee incorporated with a total accumulated bonus to make the benefits even better.

4. Dual Benefit

Endowment plans are known for their two-in-one benefits of insurance and investment. In addition to the total assured sum in case of your sudden death, you can also receive a lump sum amount upon the maturity of your plan in case you survive till the end of the tenure of your policy.

5. Tax Benefits

The most prominent advantages of endowment policies include tax benefits and deductions according to the Income Tax Act of India under section 80C and 10D on the annual premium and the death benefit offered by the plan.

6. Safety

Although you may feel that the returns offered by endowment plans are lower as compared to other investment instruments, it keeps your capital safe from the volatile conditions of the market and allows you to stay risk-free with the assured sum.

7. Compounding Returns

There’s a reason why everyone considers compound interest as the eighth wonder of the world! With a good policy, you can easily beat inflation and make your future financially secure with returns fetched on a compounding basis.

8. Flexibility in Premium Payments

Endowment investment policies also allow you to pay your premiums all at once and take the benefit of the policy in the long run. Moreover, even if you stop paying premiums after a certain period, you can still secure a lower sum using a free paid-up policy.

9. Loan Approval

When you purchase an endowment policy, you can use it as collateral to take a loan from banks whenever required. It’s accepted by a majority of financial bodies, as well as banks, located in India.

Different Types of Endowment Plans

Broadly speaking, there are two major types of endowment policies available in the market – ‘with profit policies’ and ‘without profit policies’. These two categories are further classified into different variations of endowment policies to help you choose the desired plan as per your requirements.

Here is a list of several different types of endowment plans available in India:

  1. Full Endowment Plan
  2. Endowment Assurance Policy
  3. Limited Payment Endowment Plan
  4. Low-Cost Endowment Policy
  5. Double Endowment Plan
  6. Joint Life Endowment Policy
  7. Non-profit Endowment Plan
  8. Unitized with Profit Endowment Policy
  9. Unit-Linked Endowment Plan

These plans can be used to help you achieve all your financial goals in your life such as paying for a child’s education or the child’s marriage, whole-life financial protection for your nominee, life savings, retirement, and so on. So, make sure you consider and evaluate the policies carefully and thoroughly before making your pick.

Who Should Purchase Endowment Policy?

If you’re a person with a consistent and regular stream of income, looking to gain a good amount of money after a specified timeframe, then an endowment policy certainly fits the bill for you. The plan is ideal for salaried people like doctors, lawyers, techies, etc.

It helps you achieve your financial requirements in the long run. Furthermore, if you’re worried about the market’s risks and volatility and need a good investment plan that assures you to be risk-free then you should also consider investing your capital in an endowment plan.

Additionally, as these plans are long-term by nature, a stretched policy period will ensure that you gain the maximum benefits. It’s believed that the long-term approach helps you to make the most out of your investment capital and allows you to gain maximum returns.

Things to Consider Before Choosing an Endowment Plan

It’s a wise decision to choose an endowment plan that sounds easy and simple. When you consider looking at policies with complex benefits and features, you may get overwhelmed with such a large chunk of information, especially when you have no idea about it at all.

Moreover, make sure you thoroughly go through the documents provided by your insurer before zeroing in on any policy. This allows you to prevent from making any mistakes that you might regret later during your policy tenure.

The Takeaway

If you’re looking for an investment scheme that offers you more than just a life cover, this is the perfect match for you. Along with proper insurance coverage, the endowment policies also offer you long-term wealth creation and regular-based savings. Even though the returns are quite low, your capital is completely safe from the volatile and irregular conditions of the market and hence, you can live a peaceful life.