Endowment insurance combines life insurance with a savings. It is a type of life insurance policy that offers lump sum amount on maturity or on death. This type of policies helps the policyholder to build a risk-free savings corpus and offers financial security to the family if there is any unfortunate event.
An endowment plan involves both death benefit and a maturity benefit. These will be available provided you pay all your premiums.
If Life assured dies during policy term
In this case, family members will receive a death benefit, which is equal to the Sum Assured that is decided at the start of the policy. Along with this sum assured, family may receive the guaranteed yearly additions or any other bonus depending on the type of policy.
If Life assured survives the policy term
If he survives the endowment policy’s term, then he will receive a maturity benefit. Which is the guaranteed sum. Other benefits, such as Bonus, guaranteed yearly additions and loyalty additions, are also available.
Endowment plans provide the dual benefit of both savings and life insurance coverage in a single plan. However, this is not the only feature of an endowment policy. Listed below are some of the features of an endowment plan:
You can choose your life insurance cover before buying the endowment policy. This is the amount that will be provided to your family if unfortunate death happens during the term.
You can also choose your riders in the policy. Factor in, all your family’s future needs before deciding on a suitable financial cover.
An endowment plan guarantees the Sum Assured in either death or on survival. You are required to pay the premiums regularly. This policy helps you to build a savings habit. At the maturity of the policy, you will receive a guaranteed sum with anyother additions. That is, you are assured of the amount and thus can plan your future.
You are given full flexibility to choose the mode and frequency of which you pay your premium. You can pay the life insurance premium on a quarterly, half-yearly or annual basis as per your preference.
You can also select the limited payment option, which allows you to pay your premium for a limited time and enjoy the benefit later.
You are aware of the Sum Assured returns that will be given under the policy. Thus, no risk or very low risk is involved in an endowment policy.
The benefits that are present in the policy, may further increased by bonuses, if any. Endowment plans include bonuses in the form of, interim bonuses, revisionary bonuses, final additional bonus, etc. or guaranteed yearly additions.
Depending on the plan you choose, endowment plans allow you to receive your payouts in lump sum or as instalments, as per your requirements.
Many endowment policies provide the option of availing a loan against the policy. The loan amount is a percentage of the policy's surrender value, and the interest rate is usually lower compared to other loan options.
Endowment Policies encourage disciplined savings, as the policyholder needs to pay premiums regularly to keep the policy active. This ensures that the policyholder regularly saves towards their financial goals and avoids the temptation to spend more.
Endowment plans are considered one of the best financial tools that can help you achieve your milestones. Hence, it is necessary that you know the various types of endowment plans before buying one. Different types of endowment plans which are generally available are:
This type of products participates in the profit generation of the company. The policyholder receives the Sum Assured as promised at the time of buying the policy. However, when the insurance company declares a bonus, depending upon their profit generation, in the final payout, that bonus is added. So, may be higher amount is available upon policy maturity or on the death of the insured.
Such endowment plans do not take part in the profit generation of the company and does not declare any Bonus. However, in guaranteed additions products the guaranteed amount is added along with the maturity amount. This makes these products more attractive as compared to other plans in the market
In unit linked endowment plans, the premium that you pay is divided into 2 parts. One part is used to purchase units in different investment funds as per your preference, and the other part goes toward your life insurance cover. This is often termed a Unit Linked Insurance Policy (ULIP) – one of the best saving plans that investors usually put their money in.
Limited Premium Payment Plan
This type of policy requires the policyholder to pay premiums for a specific limited period, and the policy remains in force for a longer period, such as 20 or 25 years. This allows the policyholder to complete their premium payments within a shorter duration and enjoy the policy's benefits for a longer time.
Money-back Endowment Plan
Money-back Endowment Policies are designed to provide periodic payments during the policy term. The policyholder receives a percentage of the sum assured at specific intervals, such as every 3 or 5 years. The remaining sum assured, along with bonuses, if any, is paid at maturity or in the event of the policyholder's death.
Riders are optional features that can be added to your policy. Riders may vary from plan to plan. However, few common riders that you may find with the endowment plans.
This is useful when policy holder and life assured are two different persons. If something unfortunate happens to the policyholder, such as they suffer from a lifestyle disease or they meet an accident, the life assured will not be liable to pay the remaining premiums. And the remaining premiums will be waived off by the insurance company and the cover continues.
The policyholder will get a lump sum amount in case they are diagnosed with a terminal illness. That amount can be used to pay off the hospital expenses,
If the policyholder passes away due to an unfortunate accidental event, the insurance company will pay an additional death benefit along with the existing death benefit to the beneficiaries or nominees.
Depending upon the degree of disability due to accident, a portion of the Sum Assured is paid.
Evaluate different endowment plans from various insurance firms in Kolkata.
It is essential to assess your responsibilities, the number of financial dependents, the family's lifestyle, sum that can assist your family in meeting their regular expenses in your absence etc.
Selecting a plan that meets your capacity to pay the premium and choosing the right coverage to meet your family's financial needs is most important. Try to take a longer duration policy. There is no use in purchasing insurance with extensive coverage if you cannot pay the premium. If you fail to pay the premium, your insurance will immediately lapse, and your life will no longer be covered.
The earlier you invest, the longer your investment horizon will be and the higher the returns that you will reap over the long term. It also helps build the discipline of saving regularly over time to build a corpus for important milestones in life.
Most insurers offer riders, and you must use them to the fullest.
You can choose to pay a one-time or a limited period premium paying term or a regular premium paying option with yearly, half yearly or quarterly mode, Depending upon your nature of income.
Many endowment policies offer both guaranteed and non-guaranteed returns. Guaranteed returns are declared upfront while purchasing the policy and are assured on policy maturity or the death of the insured. Non-guaranteed returns, such as bonuses, are variable in nature and are at the sole discretion of the insurance company.
An endowment life insurance policy helps you save in a disciplined manner and, at the same time, protects your life. Anyone over the age of 18 who earns money should invest in an endowment plan.
But you should consider buying an endowment plan if you can relate to the following situations:
