5 Factors to Consider Before Purchasing an Endowment Plan

Aug 30, 2018 | 3 months ago | Read Time: 3 minutes | By iKnowledge Team

Endowment Insurance Policy

With numerous investment options available in the market today, it becomes difficult for us as consumers to decide how best to put our finances to work. You may have heard of life insurance jargon like endowment plans or term insurances being thrown around without comprehending the implications of each.

If you’re wondering what are endowment plans and if they are the right investment option for you, you’re in the right place.

What is endowment plan?

Endowment refers to the quality of offering someone with something of benefit. Drawing from this analogy, an endowment assurance policy is a life insurance contract that is designed to pay a lump sum after some specified period of time on death. However, if the policy term ends whilst you are in good health, the entire sum is given to you.

It can be thought of as an investment instrument that you buy from a life insurance company. The sum assured, when returned to you, is completely at your disposal with regards to how and when you put it to use.

Endowment Insurance Plans

Here are the 5 factors you should consider before buying an endowment plan:

1. Is It the Right Plan for Me?

If you are considering investing in an endowment policy meaning you have taken the next step when it comes to your financial savings structure. If you are a salaried professional, a doctor, a lawyer or a businessperson, this sort of interval saving plan is designed for you.

Moreover, if you have trouble maintaining a constant savings and are likely to need a lump sum sometime in the future for either your retirement, children’s education or buying a house, you should definitely consider investing in an endowment assurance policy.

2. Knowing the Various Types of Endowment Policies

Once you have decided that an endowment plan is the right choice for you, the next step would be to explore the types that exist and how best each can optimise your finances. The broad types are with-profit endowment policy and without-profit endowment policy.

A without-profit or non-profit endowment policy, a lump sum payment is made on death or maturity, whichever comes first.  Whereas a profit endowment policy further has several subtypes such as Traditional with profits endowment and Unit Linked endowment plan. However, in these plans, no amount is legally agreed upon at the start of the policy term, thus making them more risk-prone.

3. Features of Your Endowment Plan

Your plan should be designed to match your current income, risk appetite, current life stage, etc. They should offer you flexibility when paying your premiums. For those with irregular or uncertain incomes, an endowment plan is often the best insurance option.

You should assure that the policy you are buying provides you with additional tax benefits under sections 80D and 10D of the Income Tax Act. It must also give you the option of availing a loan against your plan in the case of a financial emergency.

4. The Reputation of your  insurance provider

Life insurances can be tricky and many even consider it a gamble. But ensuring that you take a plan from a well-reputed company eliminates the uncertainties associated with investing in any sort of endowment plan. For example, Aegon Life is a company that has been in the business of insuring lives for over a decade in India. Placing your finances in the hands of a legacy such as this one assures you that you will be covered and your finances will be taken care of in the best possible way.

5.  The Right Circumstance for Procuring an Endowment Plan

It is always advised that you start investing at an early age. This gives you a longer horizon to invest and makes your corpus larger. Opting for an endowment plan early offers the benefit of getting an early insurance coverage. There are three objectives that your endowment plan should fulfil: ensuring the financial security of your loved ones, building savings and surpassing your investment goals.

There are numerous policies available in the market today. Aegon Life’s premier Endowment Insurance Plan has been very successful because it manages to combine a large range of coverage options with very affordable premiums and additional tax benefits. Make sure you compare plans and pick the one which suits you best.

Advt. no.: IA/Jul 2018/4232


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