An Endowment Plan an insurance product designed to help you meet your long-term financial goals.
While term plans only provide you with a life cover, Endowment Plans go one step forward and benefit the policyholder in two ways - they provide you with not only life insurance but also return on your investment.
Endowment policies come with the dual benefit of savings and life insurance cover.
Endowment policies offer assured returns, which makes them a reliable choice for policy buyers.
The returns on an endowment plan are tax-free as per Section 10(10D) of the Indian Income Tax Act.
The premium payment in an endowment policy can be made on a monthly, half-yearly and annual basis.
Endowment plans are low risk, and you can continue to enjoy the benefits as long as your premiums are paid on time.
Regular saving is important, Endowment plan helps you developing it
You are insured for the longest time, which give financial security to your family
Premium invested and returns³ are both deductible under article 80C
Additional riders⁹ can help you in time of critical illness etc.
Help in financing your child’s future to your new venture
You also get some amount of death benefit in Endowment plans
Get guaranteed¹ returns even in market uncertainties by investing in Endowment Plans
Invest regularly now and fund your own pension.
Your dreams and aspirations need to be secured. Your social and family obligations need to be fulfilled. An endowment plan is designed to do precisely that.
You get the dual benefit of life insurance as well as wealth accumulation through years of regular investing. Moreover, it brings tax benefits on two fronts too. Your premium is tax-deductible, and the maturity corpus is tax-exempt.
For individuals with responsibilities of meeting large expenses in the future, endowment plans are a blessing. They have relatively low risk yet give proportionately higher tax-adjusted returns. A lump sum amount on death and guaranteed maturity amount on survival also ensure that neither you nor your loved ones are left unprotected.
Endowment plan motivates you to save and protect you and your family in the time of crises or in your absence.
A rough timeline of an endowment plan is such: after you pay your first premium, your policy commences. In case you pass away, the life cover is paid out to your family.
If you survive the policy term upto the date of maturity, you receive the survival benefit - a lump sum amount multiplied over the years.
This way, you’re protected both in life and death.
An endowment plan is meant for someone who wants to invest and save to fulfil their future financial plans. Since an endowment plan requires a disciplined and regularised approach to savings, those with a steady flow of earnings can consider such a policy. Over the months, regular savings made in an endowment plan also help one understand the importance of savings.
Those who own and run small enterprises, professionals such as doctors and lawyers and salaried individuals can consider choosing endowment plans to meet their long-term financial goals.
Moreover, anyone seeking the dual benefit of life insurance cover as well as savings can opt for an endowment plan. These plans are designed to build a financial corpus over a period of time (during the policy tenure) and can be a good way to combat future financial contingencies.
Different insurance plans are designed to meet the different needs of people. Here are some circumstances under which choosing an endowment plan can be a good option:
To build a financial fund over the long term to meet future goals.
To have a protective life insurance cover for oneself and family.
To save money in a disciplined manner to prepare for future emergencies.
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Here are a couple of difference that separate an endowment plan from a money-back policy:
|Endowment Plans||Money-back Policies|
|If the policyholder survives the maturity of the term, the sum assured, along with any applicable bonuses, is paid out to them.||At regular intervals during the policy, the insured receives a percentage of the sum assured. The rest of the sum assured and any applicable bonuses are paid out on maturity.|
|An endowment plan can be a good option for someone seeking to build a saving corpus over the long term to meet future financial goals.||If you need to meet your expenses with a regular flow of income, then a money-back policy is a good option.|
These are the following differences between an endowment plan and a term insurance plan:
|Endowment Plans||Term Insurance Plans|
|An endowment plan offers the dual benefit of life cover plus savings.||A term insurance plan is a pure protection plan that provides financial aid to the policyholder’s family in an emergency.|
|The premium payment for an endowment plan is high since it covers maturity benefits as well as any applicable bonuses. The premium also covers the savings component of the plan.||Term plans premiums are quite affordable as they are meant to provide life cover and death benefits to the nominees in case of the policyholder’s demise during the policy term.|
|The sum assured of an endowment plan is lower than a term plan because these plans offer maturity benefits.||Since a term insurance plan is only a risk cover, the sum assured is high even when the premiums are low.|
|In an endowment plan, the beneficiaries receive a lump sum payment as a death benefit, or the policyholder receives the same as a maturity benefit.||In a term policy, the sum assured is paid out to the beneficiaries only if the policyholder passes away during the tenure of the policy.|
These are the following differences between an endowment plan and a term insurance plan:
|Endowment plans offer a combination of savings and life insurance cover.||Unit-Linked Insurance Plans offer a combination of investments and life insurance cover.|
|On maturity of the plan, the insured receives the sum assured plus any applicable bonuses.||On maturity of the plan, the insured receives the returns on market-linked investment as per the prevailing market rates.|
|One cannot make any changes to their endowment plan at any point in time.||ULIPs allow one to switch between investment funds during the tenure of the policy.|
|Endowment plans are less risky as they offer guaranteed returns.||The returns on a ULIP are not guaranteed as they are market-linked investments.|
|Since there is no investment portfolio in an endowment plan, these plans don’t offer transparency.||In a ULIP, the policyholder can access their portfolio and keep track of their investments all the time.|
The claim process is initiated by the beneficiary of the policyholder in case of the latter’s untimely demise:
These are some essential documents you need to have while buying an endowment plan:
When an endowment policy matures, the policyholder receives the maturity benefit, which is the guaranteed returns calculated on the total investment as per the pre-decided rates.
Enjoy the following tax benefits* with endowment plans in India:
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An endowment plan is ideal for anyone who is seeking a combination of savings along with a life insurance cover for themselves and their family.
In a term plan, if the life insured or the policyholder dies within the maturity period, then a lump sum is paid to the beneficiaries. However, no benefits are paid out if the policyholder survives the term.
On the other hand, in an endowment plan, the beneficiaries of the policyholder get the sum assured if the insured dies before the policy’s maturity. But if the policyholder survives beyond the maturity, then they receive the sum assured along with accrued bonuses (if applicable.
Along with the basic benefits of a life insurance plan, an endowment plan also offers additional benefits like “marriage endowment”, “double endowment”, etc. You can also add riders to your basic insurance plan.
Understand the features and benefits of an endowment plan to check if they are suitable for you. Since these plans are a little more expensive than other life insurance plans, your requirement and financial capacity should be considered before you buy one.
If you’re looking to save and invest some money for your future financial plans, then an endowment plan can be a good option. Along with savings, these plans also provide a protective life cover to you and your family.
Yes, endowment policies offer the lumpsum sum assured to the policyholder’s beneficiaries in case the insured meet an untimely end before the policy matures.
While the sum assured itself is guaranteed, the bonus along with the sum assured is not guaranteed. It is subject to the policy being in effect for a certain minimum period of time.
1 - This is applicable only if all due premiums are paid and the policy is inforce.
3 - As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
9 - Riders are available at extra cost.
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