Rachna was looking forward to explore more investment options.
She was aware about the overall benefits provided by fixed deposits, recurring deposits and so on. While she thought life insurance was only about protection she came across an article on endowment plans and their benefits.
She continued reading;
An endowment plan is a type of a life insurance plan designed to pay a lump sum amount on maturity or death of the policyholder (whichever occurs earlier). You can use this sum to fulfil any of your financial goals whether it is for your children’s education, your retirement or to purchase a house.
The important takeaway here is the saving component. An endowment policy acts as a saving instrument whereby your premiums are collated and returned to the policyholder along with additional bonus amount like loyalty additions at the end of the insurance term. Therefore, it has the dual benefit of being a saving instrument and a life cover.
If you are considering saving in an endowment policy, this means you have taken the next step when it comes to savings. If you are a salaried professional or a businessperson, this sort of interval saving plan is designed for you.
Here are 5 key benefits of investing in an endowment plan:
- Goal based savings
An endowment assurance policy acts as a saving instrument for a specific future goal, be it your marriage, buying a house, your child’s education or for your retirement. It expects you to set aside a certain amount as premium at stipulated intervals of time.
Not only does this inculcate a saving habit, it also ensures that you receive a lump-sum pay-out when you need it the most.
- Dual Tax Benefits
The income tax benefits of taking up an endowment plan are of two types: deductions and exemptions. You can deduct from your taxable income to a total of Rs. 1.5 lakh in certain instances under Section 80C of the Income Tax Act.
You can also seek exemption from gross income under Section 10 (10D) for any sum received from insurance policy as maturity proceeds and death benefits are exempt from tax.
- Loan Availability
In the case of a financial emergency an endowment policy allows you to take a loan against it.
This makes endowment policies rather liquid in nature. Your savings are therefore at your disposal should you need them prior to the maturity period.
- Safe Investment Option
Endowment plans are a type of investment instrument without the risk of fluctuating interest rates or markets. They are extremely safe saving option.
- Guaranteed Loyalty additions
Edelweiss Tokio Life GCap rewards you for saving by providing loyalty additions which will add in your maturity amount. It offers a simple reversionary bonus as a percentage of the sum assured.
After reading the above article, Rachna was keen on investing in an endowment plan so that she could start saving immediately and also reap the benefits of dual tax saving and life cover.