A lot of daily expenses drain our finances, making it nearly impossible for us to save any money for investments. Instead of worrying about these expenses, it is better to create a monetary backup in the form of an endowment policy.
An endowment life insurance is a policy that covers the life of the policyholder and also helps them save regularly over a specific time period so that he/she gets a lump sum amount at the end of the policy period. However, one can only avail of the lump sum amount if they survive the policy term.
Features of an Endowment Policy
- The lump-sum money received at the end of the policy term by the policyholder is called the maturity amount.
- The maturity amount can be used to satisfy various financial needs such as to fund one’s retirement, children’s education, or their marriage or buying a house.
- The endowment insurance policy pays the full sum assured to the policyholder if he survives the policy term or to the nominee in case of the untimely demise of the policyholder.
- Any life insurance with the maturity benefit as a lump sum amount and a savings component can be termed as an endowment plan.
- Thus, endowment plans fulfill the dual need of providing life cover and savings under a single plan.
Who Should Buy Endowment Policies?
According to experts, people who have a regular stream of income and need a lump sum amount after a period of time should opt for endowment policies. Endowment plans encourage a disciplined manner of saving, which can prove to be handy in case of any financial emergency.
Salaried individuals, small business people, and professionals such as doctors and lawyers are recommended to opt for this plan. Also, people who have a low-risk appetite and do not mind settling for lesser return while avoiding significant investment risk can opt for endowment policies. The offerings of an endowment policy differ from provider to provider, and so, you can choose one that perfectly meets your requirements through proper research.
Why To Buy Endowment Plans?
- When you buy life insurance, it offers coverage for your life. However, when you opt for an endowment insurance plan, it offers you life coverage along with a lump sum amount, in the case of survival till maturity.
- Offers you a systematic way to save money for your future needs.
- You are also eligible for tax benefits on endowment plans.
What to Check while Buying Endowment Policy?
Like any other insurance, you need to consider multiple factors such as the current life stage, financial needs, income, and risk appetite before you purchase an endowment policy. We have compiled a small checklist that you can inspect before buying an endowment plan:
- Firstly, check for the premium rates for various endowment plans as they are slightly expensive as compared to term plans.
- Next, you need to check the track record of the insurance company concerning the bonus payment.
- Also, check for the claim settlement ratio of the company.
- Check customer service ratings and reviews of the insurance company online. Avoid going by recommendations of acquaintances as your needs may differ.
- Try to opt for an endowment plan which is easy to understand. Do not choose endowment plans with complex features and benefits unless you can understand them very well.
Conclusion
Every individual wants an assured and risk-free investment in their portfolio. However, endowment plans should be purchased only when the policyholder has a steady flow of income to pay regular premiums so that the endowment policy works in their best interest.
