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Endowment Policy: Compare Plans, Reviews & Benefits Online

IndianMoney.com Research Team | Updated On Tuesday, October 23,2018, 05:13 PM

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Endowment Policy: Compare Plans, Reviews & Benefits Online

 

 

Endowment Policy: Compare Plans, Reviews & Benefits Online

What is Endowment Policy?

An endowment policy is a type of life insurance plan which not only covers your life, it also helps save money. It is an insurance cum savings plan. If the policyholder dies within the term of the plan, the nominees get the sum assured + accrued bonuses. If the policy holder survives till the maturity of the plan, he/she gets the sum assured + all bonuses. An endowment plan is an excellent way to save over a specific period of time and enjoy a lump sum at maturity, on surviving the term of the plan.

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1. Features of an endowment plan:

  • If the policy holder dies within the term of the plan, the nominee gets the sum assured and accrued bonuses. If the policy holder survives till maturity, he gets the sum assured and all bonuses like guaranteed bonus, revisionary bonus and a terminal bonus.
  • An endowment plan helps save for the future and attain financial goals.
  • Endowment plans offer flexibility in premium payments. Premiums can be paid on a monthly, quarterly, semi-annually or a yearly basis.
  • You have riders like accidental death benefit rider, critical illness and even total permanent disability rider. Child endowment plans come with a special feature called waiver of premium rider (WOP). The waiver of premium rider ensures that all future premiums are waived off in case of total and permanent disability of life assured.
  • You enjoy tax benefits up to Rs 1.5 Lakhs a year under Section 80C of the income tax act. Death benefits enjoy an exemption under Section 10(10D).
  • Endowment plans are safe vis-à-vis market-linked plans like ULIPs. Returns are not affected by market movements unlike equity funds which are very volatile. 

2. Who should consider buying endowment plans?

Endowment plans are very good for conservative investors. Avail an endowment plan to protect loved ones and also attain financial goals like money for retirement, children’s education, marriage or even buying a house. It also helps save money for retirement as you get a lump sum at maturity.

Do remember that premiums are high and you get almost nothing on surrendering early in the plan. Avail endowment plans only if you can afford the premiums. Endowment plans are of long tenure and you need steady income across the tenure.

3. In what circumstances should endowment plans be bought?

Endowment plans are of great help if something untoward happens to the primary breadwinner. The plans offer risk free returns which are lower than equity returns, but are considered guaranteed.

While returns are not great (just around 5-6%), it’s an excellent way for poor savers to save and attain financial goals. The lump sum got at maturity serves as a back up in a financial emergency. The endowment plan offers the twin security of insurance and savings.

4. Why should endowment plans be bought?

  • Endowment plans help you save money while giving you insurance cover.
  • You leave financial support for your family in case of an untimely end.
  • You invest through premiums and grow capital.
  • An endowment plan offers protection and wealth accumulation for retirement.
  • You enjoy tax deduction on premiums.
  • Money back plans, a type of endowment plan, offers money at regular intervals. Money can be arranged at important milestones.

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5. Best endowment plans in 2018

Kotak classic endowment policy:

  • Entry age of 8-60 years.
  • Maturity age of 18-75 years.
  • Policy term ranges from 15-30 years.
  • Premiums are paid monthly, quarterly, half-yearly or yearly.
  • It offers the regular and limited pay option.

LIC New Endowment Policy

  • Entry age of 8-55 years.
  • Maturity age of 75 years.
  • Policy term ranges from 12-35 years.
  • Premiums are paid monthly, quarterly, half-yearly or yearly.
  • Minimum Sum assured at Rs 1 Lakh and in multiples of 5,000.
  • There’s no maximum limit on sum assured.

SBI Life Endowment Policy

  • Entry age of 18-60 years.
  • Maturity age of 18-60 years.
  • Policy term ranges from 5-30 years.
  • Premiums are paid monthly, quarterly, half-yearly or yearly.
  • Minimum Sum assured at Rs 75,000.
  • There’s no maximum limit on sum assured.

6. Benefits of endowment plans

  • Low risk plans with guaranteed benefits.
  • Financial security for loved ones.
  • Tax benefits
  • Bonuses like guaranteed, revisionary and terminal which enhance returns at maturity. Revisionary bonuses are paid out of insurers profits. Terminal bonuses are paid at the end of the plan.
  • Riders offer additional protection to the insured.
  • You pay premiums over a short period and enjoy insurance cover across the term.

7. Things to consider before availing an endowment plan:

  • Select an endowment plan based on income, financial goals, current life stage, risk appetite and so on.
  • Compare quotes on online aggregator’s vis-à-vis endowment plans before availing them. Check premiums before availing them.
  • Check the bonus amounts offered by the policy.
  • Get an idea on the claim settlement ratio of the insurer which must be over 90.
  • Opt for a simple and easy to understand endowment plan.
  • Understand paid up policy and surrender value. Insurance cover ceases when you surrender the plan. You lose tax benefits on discontinuing premium payments.
  • You have the option of not paying premiums, but continuing the endowment plan till maturity. This is a paid up policy.

You have the formula:

Paid up Value of Sum Assured = (Number of premiums paid / Number of premiums payable) X Sum Assured.

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