Buying Endowment Plan is a nice idea and very convenient too. But have you taken everything important about this concept into consideration? Like every product or service out there, a consumer should be very prudent while enrolling for an Endowment plan and its features as well.
- Endowment Plan
It is actually a Life Insurance Plan that not only gives the basic services provided in a Life insurance policy, but also enables the policyholder to get a lump sum amount on the maturity of the policy. It has a great importance when it comes to fulfilling certain needs like education of children, marriages, retirement savings, purchasing a house, etc.
Hence, buying endowment plan gives the dual benefit of life insurance coverage, as well as maturity benefits to the insured. Therefore, it gives the convenience of savings (in the form of maturity benefits) as well as a lump sum amount in the event of the death of the insured, to his/her nominees.
People who have a habit for spilling money here and there, without any track of savings, can benefit from this type of plan to a huge extent as it facilitates them to save side by side, for any decently sized expense at a later stage in life.
Apart from what has been described above, there are many, Buying Endowments plan policy also enables the policyholder to avail tax-related benefits on his or her returns.
- Things to consider:
- Preferable conditions for buying Endowment Plan –
Why to buy this type of plan can be understood by the description put above, but when to buy is another question of importance.
- When you have a regular source of income enables you to pay the justified premiums of this policy.
- When you develop a mindset for saving that hard earned money for specific expenses, in an orderly fashion.
- When you have a desire to safeguard the family against any sudden financial crisis in case of death.
- When you seek to invest, looking forward to building a corpus, with an endowment policy.
- Kinds of Returns – The Endowment Policy mainly offers two kinds of return:
- Guaranteed: Guaranteed benefits payable on death or maturity. (fixed)
- Non-guaranteed: Includes bonuses, etc. which are of a variable nature, dependent on the investment performance.
- Premium Costs – In these plans, there is a diversion of the premium towards the life cover and maturity benefits. In the latter, some portion of the premium is invested to yield returns while the remaining amount is directed towards the former.
- Term of the Plan – These plans offer low returns on a low-risk basis. Therefore, it is essential to understand that these plans reap much greater benefits in the longer term. Therefore, this plan is only suitable if you consider running it for a long time. Any benefits received out of surrender of the policy will be much less, because of which surrendering the policy is not advisable.
- Bonuses – This aspect is entirely decided by the Insurance provider with regard to their endowment policies, considering how the investments have performed. A company making profits from the investments it has made, shares such profit with its policyholders at the end of each financial year. Bonuses tend to include:
- Simple Reversionary Bonus – Declared annually, payable on death or maturity.
- Terminal Bonus – Kind of a loyalty bonus, paid only at the time of the maturity.
- Return Rates – Rates of return on maturity benefits may vary from insurer to insurer, which makes it quite obvious that on account of caution, the consumer shall adequately understand the market situation and compare rates of return to get the most beneficial plan available.
Buying endowment plan can be an extremely beneficial tool in respect of providing financial security to the family as well as for ensuring long-term financial interests in form of maturity benefits. With an inherent low risk nature and multiple benefits, this kind of plan can be an immensely important asset which makes it absolutely necessary for the consumer to be careful about variations among different endowment policies available in the market, while understanding such basic concepts about it to procure the best of the best plans for themselves and their families.