What is an Endowment Insurance Plan?
Historically endowment policies have been the most popular policy in the world of life insurance. A pure endowment policy is also a form of financial saving, whereby if the person covered survives beyond the tenure of the policy; he gets back the sum assured with some other investment benefits. Endowment policy's maturity period varies from ten, fifteen or twenty years up to a certain age limit. Endowment Policy combines the risk cover with financial savings.
Endowment Plan= Insurance + Savings
If premium payments are discontinued at any point of time before maturity, the policy continues with a reduced sum assured proportionate to the premiums paid.
One can also surrender the policy at any time and get the surrender value, which is usually calculated as a percentage of the premiums paid excluding the first year's premium and all extra premiums. It is therefore not advisable to surrender the policy, as the amount realized will be much lower than the premiums paid.
Tax benefits: Endowment Insurance is subject to tax benefits under section 80C