Types of Endowment Policy & It's Features in India

In Unit-linked plans, the investment risk in the investment portfolio is borne by the policyholder

What is an endowment plan?

An endowment plan is a type of life insurance plan. It offers low-risk savings for future goals and a life cover⁵ to protect your loved ones in case of an unfortunate event. The guaranteed savings from an endowment plan can offer you peace of mind and protect your money from market fluctuations.

What are the different types of endowment policies?

“Never depend on single income. Make an investment to create a second source”, celebrated investor Warren Buffet said about being rich. To accumulate funds, you need to save in a disciplined manner. And endowment policies encourage regular savings, helping you to create wealth over time.

Endowment policies also offer life cover⁵ for a fixed period. In exchange for low-cost premiums, an endowment plan provides your family with financial coverage against the uncertainties of life. Besides, the returns can help you achieve your long-term financial goals like your dream house, your child's education, your retirement, and much more. Also, if you face a cash crunch, you can take loans against your policy.

With this plan, you can also avail deduction up to ₹ 1.5 lakhs for your premiums paid under Section 80C of the Income Tax Act, 1961. And the maturity amount is also tax-free^* u/s Section 10(10D) subject to conditions mentioned therein.

Considering so many benefits, endowment policies are one of the best financial tools available to fulfill your dreams. But before you buy, you need to understand the features of different types of endowment plans and the one that best suits your needs. Here’s a brief guide.

Full Endowments

Often known as with-profit endowment plans, these guarantee you an amount, as the sum assured, at the end of the policy term. In case of an unfortunate event during this period, the insurer pays this amount to your nominee.

However, the maturity benefit you receive after the policy matures is often higher than the sum assured as the insurer provides you with additional money in the form of bonuses.

Thus, full endowments can help you earn extensive earnings over time.

Low-cost Endowment

In this plan, the premium amount is less and helps you to save for future payments, due after a certain period. The insurer guarantees the sum your nominee will receive in case of an eventuality. Yearly bonuses also increase the amount payable to you at maturity.

The primary purpose is to create a fund within a defined time-frame. You can, thus, use this type of endowment to finance loan repayments or specific life goals.

Unitised with-profit endowment plan

These schemes combine the high earning potential of ULIPs with guaranteed³ returns to keep your investments safe from market fluctuations.

The scope of profits with these plans depends on the capital market. But these plans cushion the effect of market downswings with an assured payout at maturity. Regardless of the fluctuations in the capital market, you are sure to receive this guaranteed³ payback. And in your absence, your nominee receives this amount.

Thus, you can consider this product as a safe investment option with a higher return opportunity.

³ T&Cs Apply

Non-profit endowment

This policy offers a specified lump sum amount to you on maturity or to your nominee in case of any unfortunate event, whichever occurs earlier. The payout money remains unchanged as the insurer does not offer bonuses with such plans.

Thus, these plans are ideal as safety nets for your family against any financial distress in your absence.

Participating Endowment Plan

A participating endowment plan offers life cover and provides returns. The returns include bonus amounts basis the life insurance company’s performance. This bonus amount increases the overall returns from the plan.

Non-Participating Endowment Plan

Non-participating endowment plans are opposite to participating endowment plans. They do not offer bonuses out of the company’s profits. Instead, they have a fixed maturity and death benefit⁴ that is decided at the beginning of the policy term.

Features of Endowment Plans

Life cover⁵

All types of endowment insurance plans offer life cover⁵. The life cover⁵ amount is paid to your loved ones in case of an unfortunate event during the policy term.

Maturity^{^} benefits

The returns provided by your life insurance plan is called a maturity amount. An endowment plan offers maturity benefits that are fixed at the time of purchasing the plan. These maturity benefits help you achieve your financial goals.

Flexibility in premium payment

Depending on the plan you choose, endowment plans offer flexible premium payment options. You can choose to pay your premiums monthly, half-yearly, annually, or all at once as per your convenience.

Flexibility in receiving payouts

Depending on the plan you choose, endowment plans allow you to receive your payouts monthly, half-yearly, yearly or as a lump sum, as per your requirements.

Low risk

All types of endowment plans offer low-risk returns. These plans are not market-linked. Hence, the returns do not vary basis market volatility.

Tax^* benefits

These plans offer tax^* benefits under Sections 80C and 10(10D) of the Income Tax Act, 1961 as per the prevailing tax^* laws.

Features of ICICI Pru Gold plan

ICICI Pru Gold is a participating endowment insurance plan that offers the below benefits:

Choice of 3 customisable plan options

ICICI Pru Gold plan offers three plan options^~ to choose from basis your requirements.

Immediate income: The immediate income option offers a regular income^~ at the end of every policy year or month. This income starts from the first policy year and continues till the end of the policy term. You also get a lump sum on maturity^{^}
Immediate income with booster option: In addition to the immediate income option mentioned above, this option offers a guaranteed^~ amount as booster every fifth policy year

^~ T&Cs Apply

Deferred income option: In this option, you can choose to defer your income. You can choose to receive your income from as early as the second policy year or as late as Premium Payment Term plus 1 year, as per your requirements. You also get a lump sum at the time of maturity^

Unique savings wallet^$

The plan offers you a savings wallet^$ in which you can choose to accumulate your benefits instead of taking it as a payment during the policy term. This money in the wallet earns interest as per the reverse repo rate published on the RBI’s website as on the review date. The money can be used to offset^@ your future premium as well. You can also partially or completely withdraw the money from the wallet whenever you want

Option to earn guaranteed^~ boosters and bonus^#

The plan offers additional amounts in the form of bonuses^#, guaranteed^~ boosters, and terminal bonus. This increases the overall returns from the plan

^~ T&Cs Apply

Tax^* benefits on the premiums paid and payouts received

The premiums paid under the policy qualify for deductions from your gross taxable income, subject to conditions under Section 80C. The benefits received qualify for tax^* benefits under Section 10(10D) of the Income Tax Act, 1961, per the prevailing tax^* laws

Life cover⁵ for the entire policy term to secure your loved ones

This endowment plan comes with a life cover⁵ that secures your loved ones in case of an unfortunate event throughout the policy term

W/II/0005/2023-24

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Types of endowment plans FAQs

1. Do endowment plans offer a life cover⁵?

Yes, since endowment plans are a type of life insurance product, they offer life coverage.

2. Are all types of endowment plans suitable for investment purposes?

Different endowment plans have their unique benefits. So, it is important to choose a plan that best suits your needs. You must identify your financial goals, be it long term or short term. You must also assess the time you have in hand before you need the returns from your endowment plan. These factors can help you understand which endowment plan is suitable for you.

3. Are there specialised endowment plans for specific financial goals?

Yes, there are specialised endowment plans designed to meet your specific financial goals, such as retirement, a child’s higher education and more. You can browse through multiple plans and their features to select a suitable option for your needs.

4. Can I switch between types of endowment plans?

It is generally not recommended to switch between different types of endowment insurance plans. This is because surrendering your existing policy can result in additional costs and affect your financial goals. It is best to review the terms and conditions of your policy and consult with your insurance provider to explore different types of endowment insurance plans and which one is the most suitable solution for your needs.

5. What factors should I consider when choosing a type of endowment plan?

When choosing an endowment plan, you can consider the following factors:

Financial goals
Investment timeline
Risk tolerance
Premiums
Tax^* benefits
Premium payment term
Maturity benefit
Life cover⁵
Additional riders, if any

6. Are there any tax* implications associated with different types of endowment plans?

Yes, there are tax^* implications associated with endowment plans. Premiums paid towards the policy qualify for deductions subject to conditions under Section 80C of the Income Tax Act, 1961, up to a limit of ₹ 1.5 lakh per annum. Additionally, the benefits received are exempt subject to conditions under Section 10(10D) of the Income Act 1961.

7. How do I determine if an endowment plan is right for me?

To determine if an endowment plan is right for you, you need to evaluate whether the plan aligns with your financial goals, risk tolerance and investment timeline . You can also consult with a financial advisor or an insurance agent for advice on the best endowment plan for your needs.

8. Which is the most popular type of endowment plan in India?

There are various types of endowment policies popular in India, including:

Full endowment plans: They provide the dual benefit of a life cover⁵ and a guaranteed lump sum payout at maturity
Low-cost endowment plans: These affordable plans offer essential life coverage and a modest maturity benefit
Unitised with-profit endowment plans: In these flexible plans, premiums are invested in units, with profits shared at maturity
Non-profit endowment plans: They provide guaranteed benefits without profit sharing
Participating endowment plans: They offer guaranteed returns along with potential bonus payouts based on company performance
Non-participating endowment plans: They provide fixed benefits but no additional bonuses^# from the insurer's profits

Each type of endowment plan has its unique features and benefits, and the choice of the plan depends on your financial needs and goals.

Conclusion

If you are looking for the triple benefits of investment, insurance, and tax^* savings, endowment plans are a perfect choice. So invest today for a protected and secured future of your loved ones.

³ T&Cs Apply

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Disclaimers

¹ Sum Assured on Maturity is equal to Premium Payment Term X Annualised Premium.

² Cash Bonus is a proportion of the Sum Assured on Maturity depending upon the chosen Premium Payment Term. Bonus may be declared annually from the first year as ‘Regular Additions’ and will be a percentage of the ‘Sum Assured on Maturity’. Terminal Bonus may be declared by the Company and will be payable at policy maturity or on death.

³ Guaranteed Income will be set at policy inception depending on the Premium, Age, Gender and Premium Payment Term

⁴ Death Benefit is higher of: 1. Sum Assured on Death, plus accrued Regular Additions net of encashment (if any), plus Interim Regular Addition (if any), plus Terminal Bonus (if any) 2. 105% of Total Premiums Paid as on the date of death.

^*Tax benefits under the policy are subject to conditions under Sections 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any will be charged extra as per applicable rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for more details.

^~Income: In plan option ‘Immediate income’ and ‘Immediate income with Booster’, starting from the first policy year till the end of the policy term, you will receive a regular income at the end of every policy year/month, as chosen by you, provided the policy is in-force. For “Immediate Income with Booster”, along with the regular income, you will also receive a benefit (known as Guaranteed Booster) every 5th policy year provided the policy is in-force. This Guaranteed Booster will be equal to 100% of the Guaranteed Income, as applicable for the year of payment.

In ‘deferred Income’ plan option, you will receive regular income at the end of every year/month, starting from end of deferment period as chosen by you, provided the policy is in-force. You can start this income as early as 2nd policy year or as late as Premium Payment Term plus 1 year.

This regular income will comprise the following:

Guaranteed Income (GI) and
Income which will be linked to Bonus, if declared; referred to as Cash Bonus (CB)

You will receive this income till the date of maturity, death, surrender or lapse of the policy, whichever happens first.

^$ Savings wallet: You have an option to accumulate the Survival Benefit, instead of taking the same as a periodic payment during the policy term. You need to opt in for this feature through explicit consent vide request submitted to Us, whereby the Survival Benefit when due will be transferred to the Savings Wallet. Upon crediting the Survival Benefit in the Savings Wallet on the due date, the Survival Benefit will be deemed to have been paid and any amount within the Savings Wallet will be non-participating in nature. This option can be opted for and opted out at any time during the Income Term. The money within the wallet will be accumulated daily at an interest rate linked to the Reverse Repo Rate published by Reserve Bank of India (RBI). The interest rate used for accumulation under this feature will be reviewed twice every year on 1st of June and 1st of December, and will be set equal to Reverse Repo Rate published on RBI’s website as on the review date. The current Reverse Repo Rate as at June 1, 2022 is 3.35% p.a. In case the balance in the wallet is not withdrawn completely during the income term, such balance will be paid to the claimant in the event of death, surrender or maturity, whichever is earlier along with other benefit payments (if any). On payment of this benefit, the policy will terminate, and all rights, benefits and interests under the policy will stand extinguished. Please refer to the sales brochure for more details.

^{^} For all plan options, on survival of the life assured till the end of policy term for a fully paid policy, Maturity Benefit will be sum of

Sum Assured on Maturity, plus
Balance in the Savings Wallet (if any), plus
Terminal Bonus (if declared)

The Sum Assured on Maturity shall be the sum of Annualized Premium payable under the policy.

⁵Life cover is the benefit payable on death of the life assured during the policy term.

^# Bonuses will be applied through the simple bonus method. Cash Bonuses may be declared annually throughout the policy term for all three variants, and will be expressed as a proportion of the Annualised Premium. For a new policy sold with Date of Commencement of Risk on or after April 1 in any financial year, there may not be any Cash Bonus rate declared for such policies when the Survival Benefit becomes due to be paid. In such circumstances, the Company may pay a fixed cash income benefit in lieu of Cash Bonus. This fixed cash income benefit will be based on a non-participating Cash Income rate (declared by the Company annually in advance) and once declared shall remain guaranteed to be paid as part of Survival Benefit as and when it is due. Such payments in the form of fixed benefit shall continue till a Cash Bonus rate (as applicable for the policy) is declared and the Cash Bonus benefit, if declared, becomes payable at the next benefit due date. A separate Terminal Bonus may be declared under each variant, and will be payable on death, surrender and maturity, respectively, for a premium paying or a fully paid policy. Please refer to the sales brochure for more details.

^@You have the option to utilize the balance in the Savings Wallet to offset any premiums due to be paid during the premium payment term. The same has to be provided to Us as a request prior to the premium due date. Upon receipt of such request and confirmation of the same, We shall automatically deduct the authorized amount on the premium due date from the Savings Wallet. If the amount available for offset is not sufficient to adjust the due premium, the balance due premium shall remain payable by You as on the premium due date. We shall recognize the settlement of due premium only after receipt of the same in full. Please refer to the sales brochure for more details.

ICICI Pru Lakshya Lifelong Income plan UIN:

ICICI Pru Lakshya Wealth UIN:

ICICI Pru Gold (Non-linked Participating Individual Life Insurance Savings plan) – UIN:

COMP/DOC/Sep/2024/109/7087

E/II/2718/2020-21

Types of Endowment Policy

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