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Endowment Policy
Provides Insurance
Dual Advantage investment
Low Risk Investment
Rider Benefits
Endowment Policy is a form of Life insurance cover that protects the insured for a given duration of time. If the policyholder survives through the term of the policy till it matures, he/she can receive a lump sum amount together with a bonus offered by the insurer. However, in case of an unfortunate event of death of the policyholder during the term of the policy, the nominee receives the sum assured.
What is an Endowment Plan?
Endowment plan meaning can be best understood as a kind of life insurance plan that allows combined benefits of saving and life coverage. The plan helps the policyholder to save on a regular basis over a duration of time so that the insured can get capital at the end of the policy period. Here, if the insured outlives the policy duration he/she can receive the maturity amount at the end of the policy. But, if the insured dies during the term of the policy the nominee receives the amount as death benefit together with the bonus. Hence, with an endowment plan the insured can help create a wealth that can be used to meet the future financial goals of the insured.
Best Endowment Plans in India 2022
| Insurer | Plan name | Eligibility |
|---|---|---|
| Aviva Life Insurance | Aviva Dhan Nirman Endowment Policy |
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| Bajaj Allianz | Bajaj Allianz Endowment Policy |
|
| Exide Life Insurance | Exide Life Jeevan Uday Plan |
|
| HDFC Life Insurance | HDFC Life Sampoorn Samriddhi Plus |
|
| Kotak Life Insurance | Kotak Classic Endowment Policy |
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| Max Life Insurance | Max Life Whole Life Super Plan |
|
| Reliance Life Insurance | Reliance Endowment Policy |
|
Types of Endowment Policy
Below are some of the common Endowment Policy available in India:
- Unit Linked Endowment Plan
- Full/With Profit Endowment Plan
- Low-Cost Endowment Plan
- Non-profit Endowment Plan
- Guaranteed Policy Endowment Plan
Features and Benefits Of An Endowment Plan
Death/Survival Benefits
Endowment insurance allows survival benefit to the nominee of the insured if the insured dies during the policy period. But if the insured outlives the plan, he/she is eligible to get the sum assured.
Greater returns
Endowment plans let the insured create a corpus and to allow financial stability to the family of the insured. The payout received as a death benefit or as a survival benefit is also greater than that received in Term Plans.
Premium
The premium payment of an endowment plan is done on the basis of insurance coverage that is selected by the insured to pay on a monthly, quarterly, semi-annual or annual basis.
Tax Benefits
The insured is also eligible for tax benefits under the Income Tax Act of 1961 under Section 80C and others. The exemption is given on the premiums paid by the insured as well as on the maturity sum.
Low Risk
This is another benefit that the Endowment plans are safer as compared to other alternatives available in the market. So people willing to buy safe investment policies can invest in it without any fear.
How Does An Endowment Plan Work?
You already know what is an endowment policy. Let us now understand how an endowment policy works.
- Endowment plans work like other regular insurance plans offering a steady income to the insured.
- Endowment plans offer life insurance cover as well as help the insured to save for the future.
- If the policyholder survives through the maturity period, they get eligible to receive the lump sum payment of the policy.
- Money received at maturity of an endowment policy can be used for a range of purposes like buying a house, education of children, leading a peaceful retired life etc.
What to look for when buying an Endowment Policy?
Following are the things to look for while buying an endowment policy:
Start early or plan early about the investment to help in creating a good financial health over a long period of time. This way, you can have a disciplined way of saving and can get better returns.
There are various options that the policyholder can review, like choosing the right endowment plan with regular payments or single payment and so on. Only after verifying the options, one should purchase a plan.
Also, knowing the different kinds of Endowment Policies is also essential if you want to invest in an endowment plan. This is because the insured will come to know about the frequent payment of premium that has to be done for the policy.
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Further, it is important to select a plan that allows the insured to buy riders. This is because a large number of insurance companies offer extra rider facilities which can be availed by the insured person.
Many insurers also offer bonuses according to the performance of the company. Most of them distribute a certain amount of proceeds to the insured at the time of maturity if they could make a profit from his/her investments.
Endowment Vs. Money Back Policy
Below are some of the key differences between Endowment Policy and Money Back Policy:
| Basis | Money-back Plan | Endowment Plan |
| Significance | Money-back policies serve as both investment and insurance plans. Here, the insured receives a certain percentage of the sum assured on a regular basis. | Endowment plans also serve as insurance plus investment plans. But, here the insured receives the sum assured at the end of the policy period if he/she outlives the duration of the policy. However, if the policyholder dies during the term of the policy, the nominee receives death benefits and bonuses. |
| Policy Duration | Here, the policy tenure ranges from 5 to 25 years. | Here, the policy tenure ranges from 10 to 35 years. |
| Key Benefits | Key benefit is in the form of a sum assured percentage that is paid to the insured at regular intervals. | Here, the key benefit comes in the form of sum assured that is paid to the insured as a lump sum amount along with a bonus at maturity. |
| Loan Service | Under this policy, the insured cannot get a loan on the policy. | Under an endowment plan, the insured can get a loan by using the plan as security. |
Endowment Policy Vs Term Insurance
Below are some of the key differences between Endowment insurance policy and Term Insurance:
| Endowment Plan | Term Insurance |
| They offer combined benefit of insurance coverage plus savings. | They are pure life cover insurance plans. They protect the nominee of the insured if the insured dies during the policy period. |
| Premium rates are higher as they include maturity benefit plus loyalty bonus. | Premium rates are lower as they offer only the death benefit. |
| They do not offer a higher sum assured. | They offer a higher sum assured. |
| Lump-sum payment is made to the beneficiary of the insured. | The beneficiary receives the sum assured as a death benefit. |
Endowment Policy Vs ULIPs
Below are the key differences between best endowment policy and ULIPs:
| Endowment Plans | ULIPs |
| These are Insurance plus Savings Plans. | These are Insurance plus Investment Plans. |
| Lock-in period of Endowment is normally 2-3 years. | Lock-in period of ULIPs is normally 5 years. |
| These policies lack transparency. | These policies can be tracked easily for the entire investment portfolio. |
| Here, the insured receives a sum assured plus bonus at maturity. | Here, the insured is allowed to gain investment returns at maturity. |
| Insured cannot change the policy or switch policy. | Insured can make free switches of funds. |
List the documents required for purchasing an endowment plan
Below are the documents required for purchasing an endowment plan:
- Proof of Age of the Policy seeker.
- Photograph of the Policy seeker.
- Application form filled up accurately.
- Address proof of the policy seeker.
Frequently Asked Question
Endowment Plan is a form of Life insurance cover that protects the insured for a period chosen and specified in the policy document. The most important benefit of this policy is the survival benefit that the insured gets in case he/she survives the policy period. However in case of demise of the insured before the maturity of the policy, the nominee gets the sum insured as death benefit.
Yes, an endowment plan is different from a term plan. Under term plans, the nominee of the insured receives a bulk amount if the insured dies within the maturity period. However, if the insured outlives the term plan till maturity, he/she doesn't receive any amount from the Insurance provider. On the other hand, in case of endowment plans the nominee of the insured receives a bulk amount if the insured dies during the policy term. However, if the insured outlives the policy and survives till the policy matures, he/she receives sum assured as well as the accrued bonus from the insurance provider.
Below are the things guaranteed under endowment plans:
- If the insured survives the maturity period of the policy, he/she receives a lump sum amount offered by the insurer.
- If the insured dies during the policy period, the insurance provider pays his beneficiaries a lump sum amount.
- An endowment policy guarantees that you receive the sum assured either on or before the maturity date of the policy.
- However, bonuses are not guaranteed under the endowment plans. Receipt of bonus depends on the years the policy was in force.
Additional bonus is an amount that the insurer pays extra to the policyholder. Endowment policies allow two kinds of extra bonus, namely:
Reversionary bonus: This bonus is paid additionally along with the sum assured at the time of policy maturity or if the insured dies early.
Terminal bonus: It is an optional amount paid additionally at the time of policy maturity or early death of the insured.
Endowment plan should be bought because it allows basic benefits of life insurance along with additional benefits such as:
- Double endowment
- Educational endowment
- Marriage endowment
Further, the plan allows the insured to buy extra riders to add to the basic plan.
Anyone who wants to make an investment without much risk can buy an Endowment plan. These plans allow triple benefits of insurance, savings and wealth creation. Thus, it is appropriate for anyone looking for a risk-free investment policy to buy an endowment plan.
Yes, endowment policies serve as wonderful options to invest. They allow individuals to save in a disciplined manner. They help people to fulfill financial needs. They also provide life coverage to the family of the insured if the policyholder dies before the plan matures.
Yes, you should invest in an endowment policy if you want to inculcate the habit of saving. Moreover, it also offers insurance coverage benefits, so endowment plans have become popular investment tool.
Yes, you get tax benefits under endowment policies on premiums you pay and on the maturity amount received under section 80C and 10(10D) of the Income Tax Act. 1964.
