All to know before buying an endowment plan

Many expressions used in insurance are familiar, such as endowment assurance and superannuation. Even though you may have heard insurance jargon being used regularly, you might not know what words stand for or what their implications are. If you are interested in knowing more about India’s most popular savings and insurance instrument, the endowment plan, you have come to the right place.

Are endowment plans a good idea?

Warren Buffett emphasizes the importance of making your money work for you. By taking advantage of a savings plan such as an endowment assurance policy, you can gain the benefits of systematic savings, put your money to work for you, and receive periodic payments to help you achieve financial milestones.

Wealth creation and financial freedom are often confused. Wealth can only be built once you are financially free, which means you have no debt, manage your money well, lower expenses, increase savings, and make smart money choices.

Getting something of benefit is called an endowment. A life insurance product called an endowment plan, or endowment assurance plan, gives life insurance coverage, periodic payments, and guaranteed earnings at the end of the policy.

In the endowment insurance plan, the policyholder receives a maturity benefit when the policy term ends. If a participating plan has accrued bonuses, this amount is typically a percentage of the sum assured.

A death benefit of the entire sum assured is paid to the nominee in the event of the untimely death of the endowment plan holder during the policy, regardless of the number of survival payments under the plan. You can therefore meet multiple financial needs with an endowment assurance policy.

Which endowment plans and policies are there?

A popular savings-and-insurance product in India is the endowment insurance plan. An endowment plan is the smartest way to meet periodic financial milestones comfortably. Various types of endowment policies are available to meet your needs and financial goals. Choose an endowment policy option based on your risk appetite before making a final decision.

Endowment plan with unit-linked components

Endowment policies linked to unit-linked mutual funds provide you with life insurance coverage during the policy’s term. In such endowment policies, the premiums that you pay go toward two components – life insurance and market-linked funds.

Purchasing unit-linked endowment insurance policy premiums provide access to a diverse pool of investment funds with varying risk-return profiles. In addition to receiving the benefits of upward momentum in the capital market, you also stand to benefit from periodic payouts from the endowment plan.

The plan covering full endowment and with-profit endowment

A full endowment policy is typically a participating non-linked endowment assurance policy that includes life insurance coverage in addition to the entire sum assured that was agreed upon at the time of purchase. When the insurer announces bonuses, endowment policy options are participating plans.

Participants in an endowment assurance policy frequently receive a simple reversionary bonus and, if applicable, a terminal bonus. The insurer can declare a bonus at the time of policy maturity or death, resulting in the payout of the full endowment plan exceeding the agreed-upon sum assured.

Investing in low-cost endowments

Endowment plans designed for low costs include reasonable premium amounts. Creating a corpus within a defined period is a good option for this endowment plan.

The endowment plan is a not-for-profit organization

These types of non-participating endowment assurance plans can also be called non-participating endowment assurance policies. They are ideal if you want a guaranteed return at periodic intervals or the end of your endowment plan. These types of endowment policies do not offer bonuses as they are non-participating.

There is, however, a fixed amount attached to the maturity, or death, the benefit associated with an endowment plan. The policy can create a solid safety net for family members if the policyholder passes away. Endowment policies are the perfect option for those who wish to do just that.

A policy of endowment assurance offers what features and benefits?

Those seeking financial stability and support for their future endeavors should consider an endowment plan. You should consider an endowment plan if you are a spendthrift or have difficulty saving money. An endowment assurance policy is a guide to save with discipline and consistency.

With an endowment plan, you can begin meeting your future financial goals. Today, even if you’ll need a substantial amount of money in the future. Endowment assurance policies allow you to save a fixed amount over time and receive the funds back when you need them.

You can make an informed financial decision if you know the various features and benefits of endowment insurance in advance. The following features provide an overview of endowment insurance.

Protecting your life

In case of the policyholders untimely death during the period of the endowment plan, the nominee receives the sum assured in a lump sum amount or periodic installments. Your loved ones would financial future in your absence is safeguarded by life insurance.

Survival benefits

You receive guaranteed or assured benefits under an endowment assurance policy as soon as you retire. The insurer pays maturity benefits to the policyholder at the end of the policy tenure.

Premium payments are flexible.

For most types of endowment policies, policyholders can choose the payment terms that are most convenient for them. You can pay the premiums for an endowment plan monthly, quarterly, half-yearly, or yearly. Depending on your endowment assurance policy, you may also be able to make a single premium payment at the beginning of the endowment plan.

Benefits of taxation

Premiums paid for an endowment assurance policy are tax-deductible, making it a popular savings tool. Based on the current tax laws in your country, you may be able to obtain tax benefits.

Appetite for risk

Endowment plans create a corpus for risk-averse investors by providing guaranteed additions. Market risks are not involved with the other types of endowment assurance policy options except for unit-linked endowment plans. Consequently, the fluctuation in market performance has little impact on the non-linked conventional endowment plan, presenting a relatively low risk to investors.

High return on investment

Participating in endowment assurance policies further enhances the sum assured through reversionary and terminal bonuses (if announced), creating a larger corpus than most traditional insurance contracts offer.

Adding additional riders

Endowment insurance plans offer life coverage and the option of adding riders to expand your coverage. Adding additional riders offers benefits such as accidental death, total or partial disability, critical illness diagnosis, waiver of premiums, etc.

Provision for periodic payments

Because an endowment plan can provide periodic payouts, it is ideal for short-term financial goals like buying a car, renovating your home, or paying for children’s education.

The perfect savings plan for you may be an endowment assurance policy.

Your children will require capital expenditure for their needs when you retire. With a comprehensive financial portfolio, you may be able to manage all of these future needs efficiently. When you’re focused on the big picture, it is more often than not the smaller milestones that trip you up. In addition to school fees, an emergency fund must be created, make a down payment on the house, and plan family vacations. How do you pay for these expenses? You shouldn’t sacrifice your more important financial goals to pay for these milestones.

By assisting you in saving systematically and providing you with a corpus when you need it, an endowment assurance policy ensures that you will be able to meet all your financial goals now and in the future.

Endowment insurance plans from IndiaFirst Life offer total savings and protection solutions. Cashback plans from IndiaFirst Life provide long-term investment benefits with low premium payments and a guarantee of regular payouts. Suppose you’re looking for guaranteed benefits from your endowment plan. In that case, you’ll find the IndiaFirst Life Guaranteed Monthly Income Plans, IndiaFirst Life-Long Guaranteed Income Plans, and IndiaFirst Life Guaranteed Benefit Plans appealing. Consider your needs, appetite for risk, and the features and facilities offered by the insurer when choosing an endowment plan.

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