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  • 10 Benefits Offered by Endowment Policies

    Published on December 26, 2018

    It is crucial for individuals to invest in a life insurance policy to secure the financial future of their loved ones. A life insurance policy will provide safety and security to your family in the event of your demise. An endowment policy is a policy, which is a mix of both-investment and insurance. At the time of maturity of the policy, you receive the sum assured and in case of your premature death, your beneficiaries will receive a death benefit. It is one of the best investment plansif you are looking for a package of life insurance and investment.

    In an endowment plan, the maturity amount is paid at the end of the specified term or at the time of the death, whichever happens earlier. This means thatyour family members also enjoy the benefit of periodic payments. If the premiums are paid regularly, you will not only receive the amount assured but will also receive a bonus on the same. There are two types of endowment plans—profit and non-profit. Under each plan, there are different plans available for you. You can choose the plan based on your long-term financial goals.

    Benefits of endowment plans

     Endowment plans come with a number of benefits that not only increase your returns but also offer additional advantages.

    1. Dual advantage

     Endowment plans offer a dual advantage of insurance and investment. The key advantage of the plan is that the sum assured minus the outstanding premiums will be paid in case of the death of the policyholder and if the policyholder survives the term, the lump sum maturity amount will be paid.

    1. Low risk

    The returns on these plans might be lower as compared to many other products but the investment also carries minimal risk.

    1. Financial discipline

    When you invest in an endowment plan, you need to make a regular premium payment. For this, it is important to set aside a specific amount of money at regular intervals. Doing this, will bring financial discipline in your life and thereby change your approach towards savings.

    1. Guaranteed bonus

     Endowment plans come with a guaranteed bonus, which is paid as a percentage of the sum assured. In the event of survival of the policyholder, additional bonuses will be paid over the term and in case of death of the policyholder, the sum assured will be paid to the beneficiary/nominee in addition to the accumulated bonus.

    1. Compounded returns

    Incase of an endowment plan, the returns are generally higher because they are compounded over the term of the policy.

    1. Loan option

    A significant benefit of the endowment plan is the facility to take a loan against the policy as and when the need arises. You will not have to provide any asset as collateral when it comes to the loan.

    1. Tax benefits

    This is the sole reason why tax conscious individuals opt for this investment product. An endowment plan offers the benefit of double taxation. This means you get a deduction for the premium amount under Section 80C and you also get a tax benefit on the maturity amount under Section 10D.

    1. Liquidity

    As compared to many other investment products, endowment plans offer a high liquidity.

    1. Flexibility in premiums

     In endowment plans, you pay your premiums for a short period of time and enjoy benefits for the long term. This means you get flexibility in terms of premium payment. When the premium payments end after a specific tenure, you can get a free paid-up policy for a lower sum assured.

    1. Benefit of riders

     Various insurance companies offer the benefit of riders to the policyholders. Depending on your requirement, you can purchase additional riders for your policy and enhance the insurance coverage by paying an additional premium. You can also avail of the benefit of an education endowment plan or double endowment plan as per your needs.

    If you have been wondering how to invest moneyto generate wealth, consider these benefits of an endowment plan. It is advisable to choose a plan that fits your financial needs and goals. Consumers prefer to opt for the endowment plan because of the dual coverage it offers. While a term insurance might not give a guaranteed return, you can enjoy the same in an endowment plan. You receive the sum assured when you survive the policy term. This makes it an ideal investment option. If you are investing for a specific goal, you can purchase a rider that will help you with the same. An endowment policy enables goal-based savings, insurance cover, and a tax benefit. Endowment plans are the best investment plan with high returns. The returns offered by the policy could be slightly lower as compared to many other products, but it also has minimal risk and high liquidity. When you compare the features of an endowment plan with any other product, you will realize that it is a safe bet. It is a lifesaver in case of financial crisis and enables you to overcome any sort of emergency with the facility of a loan. Most importantly, the plan offers complete financial security to you and your family.