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What are Endowment Insurance Plans?

 

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. 

Salient features of an Endowment Policy

 
These are some of the salient features of an endowment policy:  

  • 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.

Benefits of Endowment Plans

  • Saving Practice

    Saving Practice

    Regular saving is important, Endowment plan helps you developing it

  • Longer Term

    Longer Term

    You are insured for the longest time, which give financial security to your family

  • Tax Benefits

    Tax Benefits³

    Premium invested and returns³ are both deductible under article 80C

  • Riders

    Riders

    Additional riders⁹ can help you in time of critical illness etc.

  • Future Goals

    Future Goals

    Help in financing your child’s future to your new venture

  • Death Benefits

    Death Benefits

    You also get some amount of death benefit in Endowment plans

  • Guaranteed Returns

    Guaranteed¹ Returns

    Get guaranteed¹ returns even in market uncertainties by investing in Endowment Plans

  • Pension Fund

    Pension Fund

    Invest regularly now and fund your own pension.

Why Do You Need an Endowment Plan?

 

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. 

 

 

How Does an Endowment Plan Work?

 

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.

 

Types of endowment policy

 

Low-Cost Endowment Plan
These plans are developed so that the insured can accumulate funds for future payments over a certain period. One can leverage a low-cost endowment plan to repay loans and debts. Also, if the insured passes away during the tenure of the policy, a minimum sum assured is paid out to their beneficiaries.
Full Endowment Plan
When the endowment plan begins, the insurer assures a basic amount to the policyholder. In case of the policyholder’s untimely death, this amount is assured to the beneficiaries. However, over the years, this amount increases due to investment growth and the addition of the annual bonus. Hence, when the policy matures, the final amount (maturity benefit/life cover payout) is higher than the initial invested amount (total premiums paid).
Unit-Linked Endowment Plan
These plans are suitable for investors who seek returns on their investments and have a high-risk profile. The plans are fixed for a specific term, and the premium amount is utilised in two parts – one half funds the purchase of units in an investment fund while the other half is used to provide life insurance cover to the policyholder and their family.
Guaranteed Policy
An endowment insurance policy assures or guarantees a sum assured to the policyholder or their beneficiaries, irrespective of whether the policyholder survives the term or not. The face value of the endowment plan is paid out to the policyholder on maturity or their beneficiaries in case of the untimely demise of the policyholder. However, while such an endowment policy offers death benefits as well as maturity benefits, it does not guarantee the payout of any bonuses.
Non-Profit Endowment:
Under a non-profit endowment policy, a fixed lumpsum amount is paid out, either when the policy matures or when the insured person dies. There are no changes in the amount as no bonuses are added to it. Such plans are better if one is seeking only life insurance cover.
Low-Cost Endowment Plan
These plans are developed so that the insured can accumulate funds for future payments over a certain period. One can leverage a low-cost endowment plan to repay loans and debts. Also, if the insured passes away during the tenure of the policy, a minimum sum assured is paid out to their beneficiaries.
Full Endowment Plan
When the endowment plan begins, the insurer assures a basic amount to the policyholder. In case of the policyholder’s untimely death, this amount is assured to the beneficiaries. However, over the years, this amount increases due to investment growth and the addition of the annual bonus. Hence, when the policy matures, the final amount (maturity benefit/life cover payout) is higher than the initial invested amount (total premiums paid).
Unit-Linked Endowment Plan
These plans are suitable for investors who seek returns on their investments and have a high-risk profile. The plans are fixed for a specific term, and the premium amount is utilised in two parts – one half funds the purchase of units in an investment fund while the other half is used to provide life insurance cover to the policyholder and their family.
Guaranteed Policy
An endowment insurance policy assures or guarantees a sum assured to the policyholder or their beneficiaries, irrespective of whether the policyholder survives the term or not. The face value of the endowment plan is paid out to the policyholder on maturity or their beneficiaries in case of the untimely demise of the policyholder. However, while such an endowment policy offers death benefits as well as maturity benefits, it does not guarantee the payout of any bonuses.
Non-Profit Endowment:
Under a non-profit endowment policy, a fixed lumpsum amount is paid out, either when the policy matures or when the insured person dies. There are no changes in the amount as no bonuses are added to it. Such plans are better if one is seeking only life insurance cover.
 

 

Who should buy Endowment policy?

 

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. 

 

 

Under what circumstances should one buy an Endowment policy? 

 

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. 

 
However, it should be noted that endowment plans are a little costlier than other types of life insurance plans. Therefore, the savings ought to be goal-based. One can opt for a single pay or limited pay option if their flow of income is unsteady or short-term, while a regular pay endowment plan is good for someone with a steady income. 

 

What to see when buying an endowment policy?

 
Here are some factors to consider when buying an endowment policy: 

Start planning early
Investments help you reap better benefits when you start early. Not only can you build a bigger fund for savings but also leverage the power of compounding over a greater period of time.
Understand the different policies
As seen above, different endowment policies are designed to meet the needs of different people. Some may have investment needs, while others may just want to build a savings fund for later.
Choose the flexibility of payment
Endowment policies come with single pay, limited pay as well as regular pay options for premium payment. Depending on the nature of your income, you can choose your premium payment method.
Select a plan with riders
You can choose an education endowment or a double endowment policy to add to your insurance plan. Some riders also help with critical illnesses or surgical assistance.
Bonus
Depending on the performance of the insurance company, the insurer might pay bonuses on the endowment plan. These bonuses are paid at the end of every year if the company earns some profit on their investments.
 

Our Plans

 

Edelweiss Tokio Life GCAP 

 

Align your future goals with the Edelweiss Tokio Life GCAP once you know the guaranteed amount you will receive from the policy. This makes your financial planning much easier than ever! 

With our GCAP investment, you enjoy the following benefits: 

 

  • Guaranteed Returns on Maturity with life cover

  • Guaranteed Accrual Additions (GAA) from 9th policy year

  • Flexible premium term and premium paying term 

  • Waiver of Premium if insured diagnosed with a terminal illness

  • Protection against 12 listed critical illnesses

  • Multiple customizations to mould the plan as per your needs

  • Loan against policy for emergency fund requirements 
 

Power of compounding calculator  

 

It is easy to understand the power of compounding on your investments with our Compound Interest Calculator: 

  • Choose your investment amount

  • Select the investment tenure

  • Pick the tenure you want to stay invested for

  • Select the annual expected rate of return.

Interest: ₹0

Total plus interest: ₹0

 

 

Endowment vs Money Back Policy

 

Here are a couple of difference that separate an endowment plan from a money-back policy:

Endowment PlansMoney-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.

 

 
 

 

 

Endowment vs Term insurance 

 

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.

 

 
 

 

 

Endowment vs ULIP

 

These are the following differences between an endowment plan and a term insurance plan: 

Endowment Plans ULIPs
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.

 

 
 
 

Claim Process of Endowment Plan 

 

The claim process is initiated by the beneficiary of the policyholder in case of the latter’s untimely demise: 

  • Inform the insurer about the incident soon. The claim form is then forwarded to the beneficiary.

  • The claim form must be signed by the nominee. It should be accompanied by a statement from the last doctor who has checked the late policyholder. A certificate from the hospital authorities where the policyholder was treated is also necessary. Further, there should be a statement from a witness present at the cremation and a death certificate. If needed, the insurer should get the completed discharge voucher.

  • In case of unnatural death, a police investigation report, an FIR, and a copy of the postmortem are needed.

  • If the policyholder was employed, then the employer’s e-certificate is needed. 

List of documents required while purchasing endowment plan 

These are some essential documents you need to have while buying an endowment plan: 

  • Proof of Residence

  • Duly filled application form

  • Photo ID

  • Proof of Age 
 

What happens when endowment policy matures?

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.

 

 

Are endowment plans tax-free? 

Enjoy the following tax benefits* with endowment plans in India: 

  • Tax benefits for the premium paid: The total premiums you pay towards an endowment plan enjoy tax benefits under Section 80C of the Indian Income Tax Act and reduce your total taxable income.

  • Tax-free returns on maturity: The maturity payouts of an endowment policy are tax-free under Section 10(10D) of the Income Tax Act.
 
 
*Check the prevailing tax norms. 

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Fire Away Queries

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Who needs an endowment plan?

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. 

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How is an endowment plan different from a term plan?

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.  

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How to know whether I should buy an endowment policy?

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. 

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Is an endowment policy good?

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. 

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Do endowment policies payout on death?

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. 

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Can I get a bonus with the sum assured after 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.  

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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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