5 Things You Should Know Before Buying an Endowment Plan

In today’s age, everyone is looking for plans that can help grow your investments. You must be looking to fulfill the financial goals for your family such as money to pay for child’s education or marriage, buying a new home, going for a family vacation abroad, etc.

In order to achieve your life’s goals, it is a right move to invest with an endowment policy. An endowment policy is a life insurance policy available with the savings feature. With life insurance coverage, it provides financial security for the family, in the event of your untimely demise during the policy term. The maturity amount payable helps you to fulfill your financial needs.

An endowment plan helps you save for important life events that help your family fulfill their aspirations and desires. It pays a lump sum amount on death or maturity of the life insured.

There are some key aspects about an endowment plan that you should understand before buying.

Endowment policies offer low returns available with low risk. It offers the dual benefit of death cover and savings feature. Many of these policies offer a combination of guaranteed and non-guaranteed bonuses. The guaranteed returns such as guaranteed additions remain fixed and are payable on death or maturity (as applicable). The non-guaranteed returns such as bonuses are variable in nature and it depends on the investment performance.

  • Bonuses

The insurance company usually declares bonuses, depending on how the investments have performed. When an insurance company makes profits from its investments, it distributes a part to its policyholders at the end of each financial year. The profits or surplus of a life insurance company is determined after the valuation of its assets and liabilities.

Under an endowment policy, bonuses include Simple Reversionary Bonus and Terminal Bonus is added to the sum assured and payable on death or maturity under the policy. Simple Reversionary Bonus is declared annually and accrued to be payable on death or maturity claim. Terminal Bonus a type of loyalty bonus and is paid only at the time of maturity of the policy.

  • Continue it for a Long Term

An endowment policy yields high returns when you maintain it for a long term. When you buy an insurance endowment plan, the benefits are payable, only in case of death or maturity claim. Surrendering the policy is not advisable, as it provides you only the meager returns. You are required to choose a policy term that helps you to achieve savings and fulfill your financial objectives.

  • Premiums & Benefits

With endowment policies, a portion of the premium amount goes towards the mortality component and the remaining amount of the premium is invested to earn returns. Under this policy, you can avail death or maturity benefit as a lump sum of sum assured plus accrued bonuses and/or guaranteed additions, as applicable under the policy chosen. This policy ensures financial cover for your family plus build a corpus till maturity of the policy. It is a 3600 financial plan that provides you & your family a complete financial cover.

  • Circumstances to Buy an Endowment Plan

One of the important aspects is, when to buy the plan. When you have a regular source of income, so you can pay the premiums and looking to achieve the goal-based savings along with financial security for your family. You can also seek to invest with an endowment policy, when looking to build a corpus.

With savings feature, you can meet several financial obligations for your family. It also ensures financial security and in the event of your demise, the insurance company pays your family the sum assured amount.

Conclusion

An endowment plan provides a life insurance coverage along with the savings component. It helps you to accumulate the wealth with the help of bonuses or guaranteed additions available under the policy. With life insurance cover, you don’t need to worry about the financial future of your family, even in your absence. It is thus a ‘must to buy’ plan. You only need to compare the features, benefits & cost of endowment plans online and then choose the one that fulfills your financial objectives.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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