What is Endowment Plan in Life Insurance

An endowment plan is a life insurance plan that offers the dual benefits of savings and protection. It helps you build wealth with guaranteed returns, along with a life cover to protect your family from your demise. Endowment life insurance offers impressive returns at the time of maturity, and the market fluctuation does not affect your returns. In this, you pay regular, limited, or single-pay premiums for a set period, and the plan offers guaranteed returns that can be used to cover varied financial goals. It includes buying a house, for a child’s education, marriage, planning to build a start-up, saving for retirement, etc.

How Does Endowment Plan Work

An endowment plan offers a lump sum payout on maturity or the policyholder’s death, whichever is earlier.

Let’s understand this with an example:

• Mr. Varun bought an enrollment plan and chose to pay ₹10,000 monthly for 10 years with a policy term of 15 years.

• He invested a total of ₹24 lakhs for 10 years and got ₹46 lakhs as a guaranteed maturity benefit after 15 years.

• Upon Mr. Varun’s unfortunate demise during the policy term, the sum assured amount of ₹24 lakhs shall be payable to his nominee.

What are the Type of Endowment Plans?

Unit Linked Endowment Plan

A unit-linked endowment plan (ULIP) is a two-in-one life insurance plan that combines life insurance with investment options. This plan divides the premium into two parts: one portion is used to provide life cover, and the remaining is invested in various market-linked funds. You can choose the type of funds you want to invest based on your risk appetite and goals.

Endowment with Full Profits 

An endowment with full profits is a participating endowment plan that offers guaranteed returns and bonuses to the policyholder. It offers sum assured plus bonuses on maturity or the policyholder’s death, whichever is earlier. It is an ideal option for someone with a low-risk tolerance because the market fluctuation does not affect your returns.

Low-Cost Endowment

A low-cost endowment plan is a type of investment and life insurance policy. It is designed to be affordable with low premiums, making it accessible to many customers. The plan is ideal for those looking to secure their financial future while managing costs.

Non-profit Endowment

A non-profit endowment plan is a long-term investment plan that offers predetermined returns. You will receive a guaranteed amount when the policy matures or in the event of the policyholder’s death. There won’t be any extra bonuses or profits beyond the guaranteed amount. The sum you’re assured when you buy the policy will be the amount you receive at the end.

Guaranteed Policy

A guaranteed policy ensures that you will receive a guaranteed amount when the policy matures or if you pass away during the policy period. This payout is assured no matter how the insurance company’s investments perform using the premiums you’ve paid.

Benefits of Endowment Policy

Here are some of the benefits of an endowment plan:

1. Insurance Coverage

   An endowment plan protects your family with life insurance. It offers the nominee a lump sum death benefit amount in case of the policyholder’s untimely demise.

2. Savings Component

   The plan offers a savings component that helps you to build wealth for your future needs. You’ll receive a lump sum amount and guaranteed additions and bonuses as a maturity benefit, allowing you to fulfill your short-term or long-term goals.

3. Maturity Benefit

   An endowment plan offers a maturity benefit amount in a lump sum to the policyholder at the end of the policy term. The insurer discloses the maturity benefit amount to you at the policy inception.

4. Fixed Premiums

   The plan gives you flexible premium payment terms and policy terms. You can choose to pay premiums as per your preference, such as regular, limited, or single-pay pay. It helps you never miss out on a premium and ensure that the policy is always in force. 

5. Additional Bonus on Endowment Policy

   Reversionary Bonus - A simple reversionary bonus (if any) will accrue during the policy term and is promised to be payable on maturity or death, whichever is earlier.

   Terminal Bonuses - A terminal bonus is an extra payment added to your base cover, reflecting your share of the insurer’s profits. It is paid at the end of the policy term or if you pass away.

6. Guaranteed Returns

   An endowment plan helps you build a corpus for the future with guaranteed returns. When purchasing the policy, the lump sum amounts payable on maturity or the policyholder’s death are predetermined, making the investment returns predictable.

7. Low Risk

   Endowment policies are safer than other investment plans like mutual funds or ULIPs because the money isn’t directly invested in stocks or the stock market.

Who Should Buy the Endowment Life Insurance Policy?

• An endowment plan is ideal for someone with low-risk tolerance and who wants to save for short or long-term future goals.
• It includes buying a house, for a child’s education, marriage, planning to build a start-up, saving for retirement, etc.
• Consider getting endowment plans for your long-term financial goals if you’re a small business owner, salaried worker, lawyer, or doctor.
• Endowment plans work well for people who don’t like taking big risks and are okay with lower returns.

Why Would an Investor Choose to Invest in Endowment Policy?

• An endowment plan offers a systematic way of saving money for future needs.
• It protects your family with a life cover and offers a lump sum death bandit amount to the nominee on your unfortunate demise.
• It is a risk-free plan, and the returns may not be affected by the market fluctuations.
• Tax benefits can be availed subject to certain conditions.
• It is ideal for someone with a low-risk appetite.
• It offers the maturity amount to the policyholder if the life insured survives till the end of the policy term.

Conclusion

If you’re looking for a stable and risk-free investment product, an endowment plan is the best choice for you. It is a two-in-one life insurance plan that combines life insurance with investment options. So, do not waste time and invest in an endowment plan today.

Are you still unsure about an endowment plan? If so, you can speak with our insurance experts and get personal assistance free of cost. Call us today at 1800-4200-269 or visit PolicyX’s official website.