An Endowment Plan is a mix of both insurance and investment. It is a life insurance policy that provides the life cover to the insured by charging mortality cost and provide a return on investment through investing the remainder portion of the premium.The policy offers both death and maturity benefits (whichever happens earlier).Endowment policy helps you to accumulate adequate corpus along with providing financial protection in case of any unfortunate event to accomplish the financial goals in your life like child’s education, marriage, post-retirement expenses, etc.
Endowment Plan
What Is An Endowment Plan?
Why Should I Buy An Endowment Plan?
Ensure Financial Protection for your Loved Ones
For Accumulation of Funds
Assured Peace of Mind
To Meet Financial Objectives
Goal Based Savings
By investing in an endowment plan, you can accumulate huge corpus at the maturity of the policy and can easily achieve your financial goals as well.
What Kind Of Endowment Plans Can I Opt From?
Typically, there are two types of endowment plans.
Traditional Endowment Plan
Traditional endowment plans are those plans that offer insurance plus investment under a single policy. Such plans are a long term life insurance contract where the policyholder has to pay premium throughout the tenure of the policy or may opt for single pay or limited payment option. The benefits under the policy are either paid out on the death of the life insured or at maturity, if the life insured survives the term of the policy. The death benefit paid under the plan is the sum assured plus the accrued bonus (if it is a with profit endowment policy) or only sum assured (if it is a non profit endowment policy) where as maturity benefits are sum assured plus accumulated bonus or guaranteed additions by the insurer.
Here the investment portion of the policy is taken care by the insurance company. The bifurcation of cost and benefits are not transparent in nature
Market Linked Endowment Plan
Unit Linked Insurance plans (ULIPs) are also categorized as endowment plans as it offers the dual benefit of insurance and investment collectively under one policy. Such plans also offer death and maturity benefits (whichever occurs earlier). Part of the premium is taken away to provide insurance by deducting mortality charges, and part of it is kept aside for investment, which is decided by the policyholder as per his/her risk appetite and is based on market performance.
A fund is created which attracts returns as per the investment made in either equity or debt instrument which is paid as fund value to the policyholder at the time of maturity. If the policyholder dies during the tenure of the plan, Sum assured or higher of Sum Assured or Fund Value is paid to the nominees and the policy ceases after that.
ULIP’s are transparent and flexible in nature, and the investment steering is in the hands of the policyholder and not the insurance company.
What Are The Benefits Of Buying An Endowment Plan?
Following are the key benefits of an Endowment plan.
Insurance Benefit
An endowment plan offers the insurance benefit by providing the life cover or sum assured to the nominee in the event of the death of the life insured during the policy term. It ensures financial protection for your dependents in case of such unfortunate event.
Maturity Benefit
By investing in an endowment plan, you can get the lump sum amount plus accumulated bonus or the fund value at the maturity of the policy, provided you have paid all the due premiums. The maturity amount also helps you gain financial security and a huge corpus to take care of the planned financial objectives or fore post retirement life.
Guaranteed Benefits
Policyholders of ‘With Profit’ Traditional Endowment Policies are entitled to receive a portion of the profits/dividends as declared by the insurance company in the form of a bonus or guaranteed. The bonus amount may differ depending on the company’s investment & return assumptions and bonus distribution policy. For Ulip’s, there are no guaranteed benefits as the returns are based on market performance or fund performance. However, few insurer’s might add Loyalty Units to the fund in the last few years before maturity.
Rider Benefit
With an endowment plan, you can avail the option to attach riders or add on covers to enhance the protection under your policy. You can choose from various available riders such as Accidental Death Benefit, Critical Illness rider, Family Income Benefit, Waiver of Premium, etc. by paying additional rider premium amount.
Surrender Benefit
In times of liquidity crunch, the endowment policies may be surrendered as per the terms of the policy, after the lock in period of 3 to 5 years. The surrender value is however given after applying certain surrender charges which vary from insurer to insurer.
Loan Benefit
Endowment policies offer the option to avail the loan against the policy. To obtain a loan, you need to fulfill some conditions such as payment of premiums for a minimum of 3 year policy period. The loan facility under the plan helps you to fulfill the financial needs of your family and quench the immediate cash requirement.
Tax Benefit
You can get the tax benefits under Section 80 C for the premium paid for an endowment plan. The proceeds of the policy are tax free as mentioned under section 10 (10) D of the Income Tax Act, 1961.The laws are subject to change.
How Is My Endowment Plan Premium Calculated?
Current Age
Present Health Status
Life Cover
Gender
Smoking/Drinking Habit
Occupation
Your occupation conjointly plays a key role in deciding the term set up premium quantity. Risky occupation like people working in the mining industry, oil and gas, fisheries or any other dangerous profession increases the premium amounts for your policy.
What Are The Types Of Bonus Payouts In An Endowment Plan?
There ar 2 kinds of bonus payouts accessible beneath Associate in Nursing endowment set up.
Reversionary Bonus
A bonus payout that is said on Associate in Nursing annual basis by the insurance underwriter and it depends on the performance of the insurance underwriter. This payout is added to the funds and payable at the maturity or death of the life insured.
Terminal Bonus
A type of loyalty bonus that reflects the performance of a ‘With Profit’ endowment policy and is paid at the maturity or the death of the life insured.
What Are Some Smart Buyings Tips?
Following ar some key tips you will refer before shopping for Associate in Nursing Endowment Life set up.
Assess your Financial Goals
Before investing in an endowment plan, it becomes quite essential to assess your financial goals to be met at different stages of your life. It helps you create a right move to spot Associate in Nursing quantity you wish to speculate therefore you’ll simply get a large corpus at the maturity of the policy. The higher the premium you pay towards the investment part of the set up, additional are going to be the returns.
Assess Life Cover
An endowment set up conjointly provides the life cowl in terms of the add assured to make sure monetary protection for your family within the event of your ending. It is one of the most important aspects when seeking the family’s happiness. Firstly, you need to consider the financial obligations such as children’s education, marriage, or debts and then choose a coverage amount that can ensure that your family is not overburdened to pay the financial liabilities in your absence.
Invest Early
It is counseled to shop for Associate in Nursing endowment set up early in your life. The reason being if you get Associate in Nursing endowment set up early in your life say at Associate in Nursing age of twenty five years, you can build a huge corpus that you will receive at the maturity of the policy. Moreover, investing in the plan in the younger age enables you to get the life cover at the lowest cost.
Assess Plans Online
Don’t be in a very hurry or get influenced by your agent. Before shopping for Associate in Nursing endowment set up, it might be a wise call to check the plans from totally different insurers and opt for the one that suits your wants. Buying the set up on-line would be a right move, as insurers usually offer premium discounts on online buying.
Choose Add-on Covers
Add-ons enhance protection to your basic endowment plan, and all these are available at an additional cost. It is so best to assess the advantages accessible with the add-ons and opt for the one that suits your wants and budget.
Check your Insurance Company’s Record
It is imperative to check on the crucial details of your insurance company like is it IRDAI approved, about the claim settlement ratio, about the financial stability, about the bonus rate offered on the endowment policies, investment expertise of the insurer, customer services, etc. Life insurance is a long-term contract it is better to be safe than sorry!
Read the Expert Reviews
Before you finalize any decision to buy a plan, don’t forget to read the expert reviews on the same. There ar many knowledgeable reviews from the business that may assist you shrewdness helpful would be to shop for a specific endowment set up. You can also consult with your friends, colleagues, and family members about the plan.
Magnify the Fine Print
Knowing all about the policy terms & conditions, its benefits & exclusions are quite imperative, so read through the policy wordings to get the clarity about the policy and then go ahead to buy the policy.
Is There Any Add-On Cover/Rider With Endowment Plan?
Following are the rider options to attach to your Endowment life insurance policy:
Accidental Death Benefit Rider
This rider ensures additional financial benefits to the nominee in case of death of the insured arising from an accident. The insurance underwriter pays the accidental death add assured to the pol, which is over & above the base sum assured of the policy.
Term Rider
This rider provides an additional death benefit to the nominee, which is additional to the base policy sum assured in the event of the death of the life insured.
Critical Illness Rider
This optional rider covers the medical costs incurred due to severe illnesses such as a Heart Attack, Cancer, and Major organ transplant, which may disable an individual that result in loss of earnings. Typically, the covered provided under this rider is the sum assured and paid additional to the sum assured in the base policy. The benefit under this rider is paid upon diagnosis of the illness.
Waiver of Premium Rider
This rider waives off all the future premiums in the event of death or disability of the life insured. The policy continues till its maturity. It enables the policyholder to enjoy benefits of the insurance policy, even when he/she cannot pay premiums.
Income Benefit Rider
By selecting this rider, the assigned nominee/family of the life insured is provided with the monthly income apart from the lump sum payout they get upon the death of the insured. The payout and different advantages ar subject to the terms mentioned beneath the rider advantages.
Disability Rider
This rider provides monthly income to the life insured in case of permanent or temporary total or partial disability arising due to an accident or illness. The payout differs and it depends on the kind of disability occurred.
What Is Not Included In My Endowment Plan?
Your endowment insurance set up has the subsequent exclusions.
Suicide clause
It states that if the life insured commits suicide within the first year of the commencement of the policy, the insurance company is not bound to pay the policy proceeds.
Aviation Clause
This clause states that if the life insured dies while traveling in a private plane as a passenger, the insurance company is not liable to entertain the claim. The benefits of the policy are paid only when the life insured dies while traveling in a commercial plane crash.
Dangerous Adventure Sports
It states that if the life insured dies due to the involvement in dangerous adventure activities such as river rafting, para-gliding, skiing, rock climbing, etc., the insurance company is not liable to pay the policy benefits.
Act of war exclusion
This exclusion states that the insurer is not liable to pay if the life insured dies as a result of the war.
Endowment Plan
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