An endowment policy combines the benefits of both life cover1 and savings. It is a reliable way to build wealth while ensuring financial security for your loved ones because the returns are fixed at the time of purchasing the plan. The life cover1 and the guaranteed return# act as a safety net for your family in times of need.
With assured maturity and death benefits, an endowment policy can help you achieve multiple financial goals.
How does an endowment plan work?
Endowment plans provide you with life cover1 and also help you grow your money. The life cover1 secures your loved ones financially in case of an unfortunate event while the returns from the plan help you achieve your financial goals.
Endowment plans offer you the flexibility to choose the premiums you want to pay towards your plan. You may pay your premiums monthly, half-yearly, yearly or all at once depending on the type of plan you choose. The life cover1 offered by your endowment plan would be 10 times your annual premium.
Endowment plans provide you with a fixed amount called the maturity amount at the end of the tenure of the plan. This maturity amount is fixed at the time of the purchase of the plan itself and is free from any market fluctuations.
In case of an unfortunate event during the tenure of your plan, your loved ones will receive the life cover1 amount offered by your plan and any additional amount as specified in your plan.
Why do you need an endowment plan?
An endowment policy can help you save and build wealth for your goals. These might be your self-goals or your family goals like retirement, start-up venture, travelling across the world or child’s higher education. With the dual benefit of a life coverage and the guaranteed returns#, it ensures financial security without exposing you to high market risk.
It is an excellent addition to your portfolio, providing stability and peace of mind for your future.
What are the features of an endowment policy?
Below are some key features of an endowment policy:
- Guaranteed returns# : Your investment grows steadily with assured returns
- Sum assured on death : In the unfortunate event of the policyholder’s demise, the nominee receives the sum assured, ensuring their financial security
- Bonus payouts : Many endowment plans offer bonuses# declared by the insurer, which enhance the overall returns
- Low-risk investment : Endowment plans provide financial stability with minimal risk
- Tax* benefits : Premiums paid for an endowment plan are eligible for deductions under Section 80C, and the maturity or death benefits are tax*-free under Section 10(10D) of the Income Tax Act*, 1961, subject to conditions
What are the benefits of an endowment policy?
Life cover
An endowment policy offers a life cover1 that can help you secure your loved ones financially in your absence. The plan pays an assured payout to the nominee in case of an unfortunate incident during the policy term.
Wealth creation
An endowment plan can be used to create wealth. The plan offers guaranteed returns^^ that can help you save wealth for your future needs.
Maturity benefits
An endowment policy offers a maturity benefit to the policyholder when the tenure ends, ensuring future financial stability.
Flexibility in paying premiums
The premiums for an endowment plan can be paid in flexible instalments, either monthly, semi-annually, annually or all at once.
Tax benefits
The premium paid towards an endowment plan qualifies for a deduction of up to ₹ 1.5 lakh subject to conditions prescribed under Section 80C* of the Income Tax Act, 1961. Additionally, the death benefits are exempt subject to conditions prescribed under Section 10(10D)*.
^^ TnC apply
What types of endowment insurance policies are available in India?
Below are the different types of endowment insurance plans available in India:
- Full/With profit endowment policy: The plan provides a life cover1 along with bonuses# declared by the insurer, which are added to the sum assured over time
- Low-cost endowment policy: The premiums are generally lower than the traditional endowment plans
- Non-profit endowment policy: The plan offers a guaranteed# maturity amount and a death benefit without any additional bonuses#
- Limited premium payment endowment policy: The plan requires you to make the premium payment for a limited period. However, the coverage continues for the full term, securing your loved ones and providing you with financial security
- Money-back endowment policy: This type of plan provides periodic payouts during the policy term instead of a lump sum at maturity. They offer liquidity along with savings while securing your loved ones in your absence
Who should consider buying an endowment plan?
An endowment plan can be ideal for creating an alternative source of income. It can offer you a lump sum income in the future. In addition, the plan provides your loved ones with financial protection in case of an unfortunate event. This type of life insurance can be suitable if you want to build savings at low risk while securing your loved ones financially.
What is an endowment fund?
An endowment fund is a type of insurance plan that provides fixed returns along with a life cover1 that protects the financial needs of your loved ones. It can be used to build low-risk savings for your future needs and to secure your family in your absence. Here are some characteristics of an endowment fund;
- Dual benefits of insurance and savings
- Low-risk savings and guaranteed returns^^ at maturity
- Flexibility to select the premium payment method
- Tax benefits under Section 80C* and Section 10(10D)* of the Income Tax Act, 1961
^^ TnC apply
Things to consider before buying an endowment policy
Below are some things to consider before buying an endowment policy:
- Evaluate your financial needs: You must choose an endowment policy that aligns with your financial goals
- Understand the features and plan type: Ensure you are familiar with the different types of endowment policies and their benefits before making a choice. You can visit different insurer’s website and read the product brochure to know more about the plan and understand how it solves your needs
- Assess the premium and returns: It is important to check the premium payment terms and affordability and ensure they suit your budget. You can use the online endowment plan calculators to check the returns needed for achieving your goals depending on the amount you are comfortable to invest
- Factor in tax benefits: It is essential to consider the tax* advantages under Section 80C and Section 10(10D) to optimise your financial planning
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