If you are the kind of person who spends more money on buying unwanted things in life, and you want to stop this stupidity, include an endowment plan in your investment plan. This is because of the fact that an endowment plan offers a structured path for long-term investment. Purchasing an endowment plan is advantageous for persons who have a steady flow of income and may require a considerable quantity of money after a particular length of time.
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What is Endowment Plan?
An endowment policy is a type of insurance that mixes savings with insurance. If the insured lives until the endowment policy’s maturity date, he or she will receive the sum guaranteed plus the reward as a maturity benefit. If the insured dies within the maturity term, the death benefit will be paid to the dependents by the endowment plan. As a result, endowment insurance is a profitable product that provides both savings and financial security. Endowment plans have higher premiums because they provide larger returns in the form of a ‘sum assured’ than normal insurance policies.
Endowment plans offer a variety of long-term savings advantages as well as insurance coverage to policyholders. In the event of an unexpected incident involving the policyholder’s life, the sum assured in the insurance is paid to the beneficiary. Endowment plans protect your home even when you are not present.
Benefits of Endowment Policy
Protection against dangers
Endowment plans provide nominees with a lump payment in the event of a catastrophic disaster. As a result, your family will be economically stable in the event of your disappearance.
If the insured lives till the end of the policy term, he or she receives the assured maturity benefit. The lump-sum payment allows you to satisfy both your long-term and short-term financial goals and objectives.
Endowment insurance is tax-deductible under Section 80C of the Income Tax Act of 1961. Under this clause, premiums paid for endowment policies are tax-deductible. This clause also allows you to save money on taxes when the policy matures.
Features of an Endowment Insurance Policy
As we discussed before, the first feature of an endowment policy is nothing but it is a life insurance plan that offers life cover as well as the chance to save consistently over a period of time in order to earn a lump-sum payment when the policy matures. As a result, one may utilize this maturity advantage to meet a variety of financial demands, such as paying for their children’s schooling, saving for retirement, purchasing a home, children’s marriage, and so on. The plan not only offers a maturity benefit, but the beneficiary of the insurance also gets the whole sum insured amount in the event of an unforeseen occurrence. That is why an endowment policy is called an insurance policy that helps you to save money for the future and provides a maturity benefit.
The key benefits of an endowment plan are financial stability for family members, tax break under sections 80C and (10D) of the Income Tax Act, savings for future, and the possibility to borrow against the policy in the event of a catastrophe.
Why Invest In An Endowment Plan
Below are the reasons why purchasing endowment insurance is a good option.
Encourages Systematic Savings Plans
Endowment plans motivate investors to save and keep them going in the long run. These plants assist in securing the premium as a savings corpus that may be accessed when required. The saving corpus operates smoothly as long as the premium is paid on time, as specified in the plan.
Survival and Death Benefits
Endowment policies offer the insured the sum promised plus collected bonuses if the insured lives the maturity term. In the event of the guaranteed’s death, the selected dependents get the sum assured plus the bonuses. As a result, endowment policies provide the investor with both survival and death benefits.
Premium Waiver Feature
Waiver of Premium might be included as part of the endowment policy or added afterward as a rider. This provision assures that if the insured dies, the insurance will continue to run its course without disruption by waiving any further premiums.
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Money Lending Feature
Endowment policies enable the insured to lend from the insurance. This function may require some time to function in some plans, and interest will be levied on the existing loan at a rate specified by the firm from time to time. If the insurance expires during the loan term, the firm has the right to take the existing loan amount plus all outstanding interest before issuing a payment.
No taxes will be paid on insurance premiums and ultimate distributions under the endowment insurance under Sections 80C and 10 (10D) of the Income Tax Act of 1961. This is an advantage since the final amounts obtained by the specified beneficiary will not be hampered by taxes, ensuring that your family receives the whole sum in times of necessity.
Riders available under Endowment Plan
The following perks are available with an endowment policy; however, they are optional.
- Critical Illness: If the insured is diagnosed with a critical illness such as cancer, heart attack, paralysis, renal failure, etc., the insured will be covered. The insured will get a large sum payment.
- Accidental Death: If the insured chooses this optional rider, the insurance company will provide an accidental death benefit with the Death Benefit to the dependant.
- Disability: If the insured is suffering from a temporary or permanent disability, the disability rider is quite advantageous.
- Waiver of premium: With this rider, the policyholder is not required to pay the endowment insurance premiums if the insured suffers from a catastrophic illness or is permanently handicapped.
- Hospital Cash Benefit: In the event that the insured is hospitalized, the Hospital Cash Benefit offers them an everyday allowance as well as post-hospitalization payments.
Endowment Policy Premium Calculator
A premium calculator is an instrument that estimates the premium amount you would be needed to pay if you purchased a certain policy. Every insurer with a website offers an online premium calculator. The calculators are easy to use since you simply need to input data about the insurance you need, your present age, the policy term you would like, and the sum you need as a sum assured.