LIFE INSURANCE BASICS

What is Endowment Life Insurance

Everyone wants to live a long life and see their family flourish. Contrary to popular belief, life insurance isn’t just a pessimistic plan meant to protect your loved ones after your untimely death or disablement. You can even use a life insurance policy to secure a happy, fulfilling post-retirement life you can enjoy with your whole family, with the invaluable help of an Endowment Life Insurance policy.

What are Endowment Life Insurance plans?

Simply put, endowment plans are life insurance policies that not only cover the individual’s life in case of an unfortunate event, but also offer a maturity benefits at the end of the term. After a specific period of time- called ‘maturity’- they are designed to pay a lump sum amount. The insurance company will pay this assured sum to the endowment policy holder’s nominees in case of holder’s death or to the holder himself on a fixed date in the future.

Why opt for Endowment plans?

Endowment life insurance policies have certain obvious benefits.

For starters, the policy holder has a pool of savings when the policy matures. He can either reinvest the amount or use it to enjoy life post-retirement. Thus, this policy is almost risk-free and offers a steady amount on a fixed date as long as the premium is paid.

You can also use this money for your monthly expenses, your child's education or wedding, or even for a much-deserved vacation.

There are three kinds of benefits associated with Endowment Insurance plans:

  • Maturity Benefit: This is the substantial amount you receive at the end of the term, when your policy matures.
  • Death Benefit: This is the money your loved ones receive once they claim for it in case of your untimely death. This is equivalent to the life insurance policy cover.
  • Tax Benefits: Endowment insurance plans also offer tax benefits. The premiums you pay can help you reduce your taxable income as per India’s Income Tax laws.

Endowment plans with a maturity of 15 to 20 years are more profitable since you manage to accumulate more money over a longer period. This maturity amount can then be used to fund large expenses in the future.

What’s more, some plans offer guaranteed returns and bonuses in addition to the sum assured, which are added to the policy holder’s account every year. These benefits, along with the tax savings, make the endowment life insurance policy an extremely appealing investment instrument.

Is an endowment plan suitable for you?

  • Are you looking for a low-risk plan with the dual benefit of insurance and investment?
  • Are you looking for a plan with a long-term investment perspective that gives you a lump sum amount in the end?

If yes, then an endowment plan is suitable for you.

Some points to remember

Remember, endowment plans come with a surrender value—this is the amount you receive in case you want to discontinue the plan. However, you are eligible to receive this amount only after paying the premium for at least two years. This surrender money can come handy in case of a financial emergency. That said, you should keep in mind that the surrender value is usually lower than the total premium paid in the initial policy years, which means that it isn’t a benefit as much as a partial compensation.

So, are you going to invest in an Endowment Life Insurance Plan?