Looking for Endowment Plans? We List 5 Key Benefits For 2018

Dec 03, 2018 | 9 months ago | Read Time: 3 minutes | By iKnowledge Team

You may have heard about endowment plans and are interested to explore your investment options. Here is an easy to understand guide about the benefits of an endowment assurance policy.

A term life insurance is the safest and most secure way to protect your family or dependants against financial contingencies that may arise in the event of your untimely demise. But there are so many kinds of insurances in the market today that it is difficult to decide which one to choose. With all the financial jargon we are subjected to, you may have wondered what is endowment plan all about?

What are endowment plans?

Simply put, an endowment plan is a life insurance contract that is designed to pay a lump sum after some specified period on death. However, if the policy term ends whilst you are in good health, the entire sum is given to you. You can use this sum however you want to, whether it is for your children’s education, your retirement or to purchase a house.

The important takeaway here is the saving component. An endowment policy acts as a saving instrument whereby your premiums are collated and returned to the policyholder (either you or your family) at the end of the insurance term. Therefore, it has the dual benefit of being a saving instrument and a life insurance cover.

If you are considering investing in an endowment policy, this means  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.

Here are 5 key benefits of investing in an endowment plan:

1.Goal Oriented Savings

An endowment assurance policy acts as a saving instrument for a specific future goal, be it buying a house, your child’s education or for your retirement. It expects you to set aside a certain amount as premium at stipulated intervals of time.

Not only does this inculcate a saving habit, it also ensures that you receive a lump-sum pay-out when you most require it.

2. Dual Tax Benefits

The income tax benefits of taking up an endowment plan are of two types: deductions and exemptions. You can deduct from your taxable income to a total of Rs. 1 lakh in certain instances, such as your insurance payments from gross income under Section 80C of the Income Tax Act.

You can also seek exemption from gross income under Section 10 (10) D for any sum received from insurance policy as maturity proceeds and death benefits are exempt from tax. 

3. Loan Availability

In the case that a financial emergency should befall you, unlike a regular life insurance, an endowment policy allows you to take a loan against it. Such a loan does not usually require a collateral.

This makes endowment policies rather liquid in nature. Your savings are therefore at your disposal should you need them prior to the maturity period.

4. Safe Investment Option

Endowment plans are a type of investment instrument without the risk of fluctuating interest rates or markets. This makes them an extremely safe saving option. Life insurances are inherently created to provide you and your loved ones an umbrella to tide over tough times. An endowment policy capitalises on this fact.

If you are a young professional looking to save for your first house or if you are earning your retirement and are looking to save enough for you child’s marriage, an endowment assurance policy is the right choice for you.

5. Additional Benefits

Many plans today, such as Aegon Life’s Premier Endowment Insurance plan offers you additional bonuses. At the end of each year starting from the first policy year, it offers a simple reversionary bonus as a percentage of the sum assured. The bonus once attached to the policy forms a part of the guaranteed benefits and is paid in case of maturity or death, whichever is earlier.

Other plans often come with riders and health insurances.

Aegon Life offers a multitude of insurance plans to suit your requirements that guarantee protection with promising benefits. Take a look at its wide range of plans to find out more.

II/Oct 2018/4487


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