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What are Endowment Insurance Plans?
An endowment plan is a type of life insurance product which either pays a lump sum on its maturity or on death or/and, regular amount to you after a specific term, also, known as survival benefit. An Endowment Plan is 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 cover but also returns on your investment for wealth-creation.
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 during the policy term up to the date of maturity, you receive survival benefit during the policy term and/or, a lump sum amount at maturity.
- This way, you’re protected both in life and death.
With an endowment plan, not only do you create wealth, but you also provide a safety net for your family members in your absence. It helps you fulfil your hopes and dreams for your life, such as buying a home, taking care of your family, planning holidays, and making dreams come true. An endowment insurance plan can help you achieve your goals with complete peace of mind.
Salient Features of an Endowment Policy
- Endowment policies come with the dual benefit of savings and life insurance cover.
- Endowment policies policies offer returns, which makes them a reliable choice for policy buyers.
- The total premiums you pay towards an endowment plan are eligible for tax benefits3 under Section 80C of the Indian Income Tax Act, 1961.
- The returns on an endowment plan offer tax benefits3 under Section 10(10D) of the Indian Income Tax Act, 1961.
- The premium payment in an endowment policy can be made on a monthly, quarterly, half-yearly and annual basis.
- Endowment plans are low risk, and you can continue to enjoy the benefits provided all due premiums are paid and the policy is in-force.
Benefits of Endowment Plans
Saving Practice
Regular saving is important, and an endowment plan can help you develop a disciplined saving habit.
Longer Term
You are insured for the longest time, which provides financial security for your family.
Tax Benefits³
Premiums invested and returns received offer tax benefits under section 80C and 10(10D), respectively.
Riders
Additional riders can help you enhance protection during accidents, critical illness, disabilities, etc.
Future Goals
It helps finance your child's future or your new venture.
Death Benefits
Endowment plans also offer life coverage throughout the policy term to secure your loved ones in case of any unforeseen circumstances.
Guaranteed¹ Returns
You can get future assured returns on your investment through non-participating endowment plans.
Pension Fund
Invest regularly now to fund your own pension later.
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 precisely do that.
You get the dual benefit of life insurance as well as wealth accumulation through years of regular investing. Moreover, it brings tax benefits³ 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. It is a risk-free investment that generates guaranteed¹ returns. A lump sum amount on death and guaranteed1 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.
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Do Endowment Plans Offer Tax-Benefits³?
1. Tax benefits³ for the premium paid: The total premiums you pay towards an endowment plan enjoy tax benefits3 under Section 80C of the Indian Income Tax Act and reduce your total taxable income.
2. Tax Benefits³ on returns on maturity: The maturity payouts of an endowment policy have tax benefits3 under Section 10(10D) of the Income Tax Act.
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.
What to See 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 short-term investment needs such as paying for higher education, while others may just want to build a savings fund for long-term such as planning your retirement or buying a house.
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
Riders⁹ help you with enhanced financial protection against any critical illnesses, accidents, disabilities, hospitalization, etc.
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 short-term investment needs such as paying for higher education, while others may just want to build a savings fund for long-term such as planning your retirement or buying a house.
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
Riders⁹ help you with enhanced financial protection against any critical illnesses, accidents, disabilities, hospitalization, etc.
Endowment Vs Money Back Policy
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. |
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. |
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.
What Happens When Endowment Policy Matures?
Endowment plans, like all life insurance policies, have a set term. Upon the completion of this term, the endowment policy is considered mature. For example, if you choose an endowment plan with a 15-year term, you will receive the maturity benefits at the end of this term. This means you will receive the payout from the policy. If you are alive when the policy matures, the maturity benefits will be paid directly to you. However, in the event of your untimely death during the policy term, the death benefit listed in the policy will be paid to the beneficiaries named in the policy documents.
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 post-mortem is 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
Reasons Why You’re Bound to Love Us Back
98.09% Claim Settlement Ratio^²
Our Promise of Integrity- 98.09% Claim Settlement Ratio^² for FY 2022
Best Customer Experience
Customer Experience Excellence in CX 2022 – Economic Times CX Summit^³
Fire Away Queries
Like teachers say, there are no silly questions
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.
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 income along with accrued bonuses (if applicable).
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 returns to help you meet your life needs. 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.
Is an endowment policy a good investment?
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.
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.
We are always there for you!
For queries, write to onlinesales@edelweisstokio.in
Can I surrender my endowment policy before maturity?
Yes, it is possible to surrender an endowment policy before it reaches maturity. This means that you will no longer be covered by the policy and will receive the cash value of the policy, which is the amount of money that has accumulated in the policy through premiums and investment returns.
However, it is important to note that surrendering an endowment policy before it reaches maturity may result in a loss of value. This is because the cash value of the policy may be less than the amount of premiums that you have paid, especially if the policy has not been in force for a long time. Additionally, surrendering an endowment policy may also trigger surrender charges or other fees, which can further reduce the amount of money you receive.
We are always there for you ! For queries, write to onlinesales@edelweisstokio.in
Disclaimer
1 - This is applicable only if all due premiums are paid and the policy is in-force.
3 - As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
4 - If declared, Cash Bonus is a non-guaranteed bonus which may be payable based on the performance of the participating fund of the Company.
9 - Riders are available at extra cost.
^² - Claim statistics are for Financial Year 2021-22 and is computed basis individual claims settled over total individual claims for the financial year. For details, refer to Public Disclosures in our Website.
^³ - Excellence in CX-2022 has been received at the 3rd Edition of The Economic Times CX Summit. This award has been given to those organisations who have demonstrated excellence in Customer Experience in FY22.
Edelweiss Tokio Life - Accidental Total and Permanent Disability Rider is only an Individual, Non-Linked, Non-Par, Pure Risk Premium, Health Insurance rider. UIN 147B001V03
Edelweiss Tokio Life - Accidental Death Benefit Rider is only the name of an Individual, Non-Linked, Non-Par, Pure Risk Premium, Health Insurance Rider. UIN 147B002V03
Edelweiss Tokio Life - Critical Illness Rider is only the name of the Individual, Non-Linked, Non-Par, Pure Risk Premium, Health Insurance rider. UIN 147B005V03
Edelweiss Tokio Life – Payor Waiver Benefit Rider is only the name of the Individual, Non-Linked, Non-Par, Pure Risk Premium, Life Insurance Rider. UIN 147B014V04
Edelweiss Tokio Life - Waiver of Premium Rider is only the name of the Individual, Non-Linked, Non-Par, Pure Risk Premium, Health Insurance rider. UIN 147B003V04
Edelweiss Tokio Life - Hospital Cash Benefit Rider is only the name of an Individual, Non-Linked, Non-Par, Pure Risk Premium, Health Insurance Rider. UIN 147B006V03
^^ Applicable where the taxable income exceeds Rs. 5 crores. Tax benefit of ₹ 64,116 is calculated at highest tax slab rate of 30% (in addition to income tax, a surcharge of 37% is applicable where the Taxable Income exceeds 5 Crores) on life insurance premium u/s 80C of ₹ 1,50,000. As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
* Tax benefit of ₹ 46,800 is calculated at highest tax slab rate of 30% (in addition to income tax, cess of 4% is also applicable) on life insurance premium u/s 80C of ₹ 1,50,000. As per provisions of Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.
The Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender/withdraw the monies invested in Linked Insurance Products completely or partially till the end of the fifth year.
Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. Please know the associated risks and the applicable charges from your Personal Financial Advisor or the Intermediary or policy document of the Insurer. The premium paid in unit linked life insurance policies are subject to investment risk associated with capital markets and the unit price of the units may go up or down based on the performance of investment fund and factors influencing the capital market and the policyholder is responsible for his/her decisions.
ARN: CP/3108/Feb/2023
