An endowment plan is a life insurance plan which offers the twin benefits of insurance and saving. If a policy holder dies within the term of the plan, the nominees get the sum assured and accrued bonus. On survival of the policy term, maturity benefits are paid. Salaried people avail Endowment Insurance Plans to save tax. You can avail endowment plans and enjoy a tax deduction up to Rs 1.5 Lakhs a year under Section 80C. These plans are heavily marketed by insurance agents, who earn high commissions by selling to professionals, doctors, lawyers and so on.
IndianMoney.com reviews say never mix insurance with savings. Avail insurance only for risk protection. Term life insurance offers only risk protection with no survival benefit. An IndianMoney review says avail a term insurance plan for risk protection and invest in fixed deposits, PPF, Post office schemes or equity mutual funds and stocks as per risk profile.
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When an insurance agent approaches you he first advises availing endowment plans. He lists all the benefits and lures you into availing an endowment plan.
IndianMoney reviews say a part of premiums paid go towards insurance. A part goes for administrative expenses and a huge portion especially in the initial years towards insurance agent commissions. What’s left is invested in debt instruments. You get returns of around 6% in spite of all bonuses which is nothing to boost of.
IndianMoney reviews say people love endowment plans because of the maturity benefit. This is essentially the sum assured and a bonus (guaranteed and revisionary bonuses) and a terminal bonus. To offer sum assured and bonus, the endowment plans charge high premiums. The insurer pays a whopping 35% commission to insurance agents in the first year of the plan. IndianMoney complaints say people who are dissatisfied with endowment plans surrender plans and incur surrender costs. They feel cheated and lodge complaints for fraud.
Many people avail endowment plans for tax benefits. IndianMoney reviews say they prefer to get rid of these plans when they have other investments under Section 80C. They may be forced to surrender endowment plans at low value. They feel cheated and this brings a bad name to the insurance sector in India.
SEE ALSO: Health Insurance Plans
IndianMoney reviews say if you surrender the plan early, you could be hit financially. Endowment Plans have low surrender value in initial years. Avail Endowment Plans only if you are willing to stay invested for the long term.
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