One of the most confusing parts of financially securing your future is selecting the right insurance product that suits your needs. Traditional life insurance policies reward the nominee only when the insured individual passes way. Endowment plans, on the other hand, offers double advantage as they also act as an investment vehicle for the insured. Endowment plans act as a life cover for the insured for a specific period and if he or she is alive they receive a lump-sum, when the plan attains maturity.
In case of death of the policy holder during the policy term, the nominee receives the sum assured and also the bonus associated with the plan. Normally, endowment policies having a time period of 15-25 years are reasonably profitable as the policy holder manages to accrue money over a long period. Premium is paid every year and the individual can pay the premium monthly, quarterly or yearly. Anyone having a regular flow of income can opt for endowment plans. This also inculcates savings habit in the individual. Since the tenure of the policy is long, it is advisable to start early.
These plans are suitable for risk averse people. These types of plans come with other advantages compared to plain vanilla policies such as term insurance policies. Individuals with endowment plan are eligible for availing loan against the surrender value, which is the value a policy holder will get if he/she decides to exit the policy before maturity. However, the policy holder is eligible to receive this amount only after paying the premium for at least two or three years, according to the terms of the plan.
It also has the benefit of solving one’s liquidity problem, as it gives the option to withdraw a partial amount from the corpus during the course of the plan. But, this will affect the returns from the policy as the corpus gets reduced. In addition, the premium paid can be deducted from the total income and tax benefits can be availed under Section 80 C. Endowment plans can also be customised and additional coverage for accidental death benefit, , critical illness, etc can be availed by paying extra premium. Although the returns are average at around five per cent, endowment policies are popular among Indians as they solve the dilemma between how much to save and insure.
