Your financial responsibility is immense if you are your family’s primary breadwinner. You will have many long-term life goals that require you to put aside some money from your income. You will also need a life insurance cover to ensure that your loved ones do not come under any financial strain in case of your sudden demise. Maintaining multiple investments is not always possible, especially with the cost of living rising constantly. So how can you ensure that these dual purposes are fulfilled?

Endowment Policies are a promising option for you and your family, as they combine insurance and savings into a single financial product and provide numerous other benefits. So let us first get a brief overview of what they are and how they can benefit you, and then finally, see how you can select the right Endowment Policy for your loved ones.

Understanding Endowment Policies

Endowment policies don’t differ all that much from standard insurance policies. Similar to insurance policies, these plans provide a life cover for a sum assured to the policyholder. However, they also provide the opportunity to save money routinely over a certain length of time. For example, suppose the policyholder has lived through the policy term. In that case, they will get these savings (with or without profits) in a lump sum maturity payment that you can use to cover expenses like paying for a home, children’s schooling, planning a wedding, or retirement.

Some features of Endowment Policies are as follows:

• In an endowment policy, the sum assured is paid out either at the completion of the policy period or upon the policyholder’s death while the policy is active.
• There are two broad classifications of endowment policies: “With Profit” and “Without Profit.”
• As per the type of endowment policy, the bonus/profit from the entire policy period is paid out at maturity or along with the sum assured in the case of the policyholder’s death, whichever occurs first.
• Endowment policy premiums may be confined to regular or irregular payments over a period of time or paid all at once.

How Can They Benefit You?

• Endowment plans provide the benefits of both long-term investments and insurance.
• Endowment plans are risk-free in terms of the amount assured.
• Disciplined savings are encouraged by endowment plans due to the need to set aside a predetermined sum for the premium payment at a predetermined interval.
• Some types of endowment plans often specify an annual bonus that is usually added to the amount assured.
• One of the main benefits of endowment plans is that they provide returns that compound over the policy term.
• Policyholders may borrow money against an endowment policy whenever they need to, typically without putting up any security.
• Endowment plans provide tax exemptions under Sections 80C and 10D of the Income Tax Act for the yearly premium (up to ₹1.5 lacs) and the death benefit, respectively.
• Insurance firms provide policyholders extra perks and riders like marriage/education and double endowment plans. By paying a small price, policyholders of an endowment plan can also add additional riders for accidental death, total disability, critical illnesses, etc.

How Can You Select the Right Endowment Plan for your Loved Ones?

• Choose a suitable policy term

The time frame that the life insurance will be effective is known as the policy term. If you outlast the policy, this is also the point at which your funds will be paid out to you as maturity benefits. On the other hand, a short policy term could leave your family without financial protection or might not create a sufficient corpus. Therefore, select the appropriate policy term for your endowment plan.

• Look at the premium payment options

As discussed, some endowment plans can be single-premium policies, requiring just a single, lump-sum premium payment. Others may have the option of regular premium payments, where the premium is paid over the policy term, or restricted premium payments, where the premium is paid for a shorter period.

• Make sure of the insurance company’s standing

Make sure you are making the purchase from a reputable insurance company before you make your purchase. Look through the feedback left by previous clients. Additionally, pay attention to other important figures like the insurer’s solvency ratio and the claim settlement ratio. The solvency ratio shows whether the company’s cash flow is sufficient to cover the claim obligations, whereas the claim settlement ratio shows the percentage of received claims that the insurer settles.

• Learn about the different kinds of endowment plans

Making regular premium payments is essential to investing in an endowment plan. A portion of the premium payment goes toward buying a life insurance plan. The balance is invested in a plan that is either profit-based or non-profit-based. Understanding your needs and risk appetite is crucial before purchasing a plan. Only then should you choose a policy.

• Select a plan with riders

Riders are essential if you want to enhance the scope of your base insurance plan. It is no different for an endowment plan, and you must choose appropriate riders to ensure that your plan is comprehensive in nature.

Conclusion

The right endowment policy is ideal to ensure your loved ones’ financial security and create a long-term corpus to fulfill your life goals. If chosen carefully, it can be one of the best additions to your financial portfolio. You can research more online and learn more about these plans to choose the perfect plan for your individual needs.