Overview
Many people focus on short-term goals when it comes to financial planning, such as saving for a vacation or buying a new gadget. However, what if there is a way to save money and secure your future? An endowment plan is an insurance policy that goes beyond just saving money. This blog will explore different endowment plans, its types and their lifelong benefits.
What is an Endowment Policy?
Endowment policies are the most popular type of life Insurance. An endowment policy protects your savings. It is unlike other regular insurance policies, which only provide financial support in case of death or disability. Still, endowment plans offer a lump sum at the end of the policy term, even if the policyholder survives the term. This means whether you live or pass away during the policy term, you or your beneficiaries will definitely receive an amount.
Types of Endowment Plans
1. Low-Cost Endowment Plans
As the name suggests, low-cost endowment plans offer benefits similar to other endowment plans but with lower premiums. These plans are suitable for individuals who want to pay lower premiums and enjoy life insurance benefits.
2. Unit-linked Endowment Plans
Unit-linked endowment plans offer both insurance coverage and investment opportunities. The premiums you pay are divided into two parts: one part goes to your preferred investment, while the other is allocated towards insurance coverage. The investor considers the plan best as you get to save both ways. Also, the performance of these investments determines the maturity benefit.
3. Guaranteed Endowment Plans
As the name suggests, under this policy, the policyholder receives guaranteed advantages. Not only will he receive a lump sum amount on maturity, but he is also liable to yearly or loyalty additional.
4. Non-profit Endowment Plans
Since they are not vested in the life insurance company’s profits, these endowment plans offer guaranteed additions instead of bonuses. This feature not only generates returns for policyholders but also enhances their appeal compared to other available plans.
Benefits of Endowment Plans
1. Savings and Investment
Endowment plans encourage policyholders to save with investment. The premiums paid by the policyholder are divided into two parts. One part is allocated towards investments such as stocks, bonds, and mutual funds, allowing your money to grow over time and the other goes to life insurance coverage.
2. Financial Protection
Endowment plans are considered Low-risk plans as the policyholder knows they will receive a payout under this policy. Hence, fewer risks are associated with this plan. Also, they provide financial protection to your loved ones in case of your untimely demise during the policy term.
3. Maturity Benefit
One of the key benefits of endowment plans is the maturity benefit, which is paid to the policyholder during the policy’s maturity. This lump sum payout can be used for various purposes, such as future education, further savings, and daughter marriage, or it can be used by the beneficiaries.
4. Tax Benefits
Endowment plans offer tax benefits under the Income Tax Act of 1961. The premiums paid towards the policy are eligible for tax deduction under Section 80C, while the maturity proceeds are tax-free under Section 10(10D), subject to certain conditions.
5. Flexibility
Endowment plans offer flexibility regarding premium payment frequency, policy terms, and coverage options. The policyholder can choose to pay the premium monthly, quarterly, half-yearly, or annually. You are also eligible to customise your policy according to your financial goals and requirements.
Conclusion
Endowment plans are versatile and flexible modes to protect your savings. It differs from other life insurance policies as it offers advantages to invest and save. Whether you’re looking to secure your family’s financial future or trying to grow your money, the endowment plans allow you flexible and customisation options. With various plans available in the market, it is essential for one to consult with an expert before investing in such a policy. One can contact Insurance Samadhan, a platform that provides guidance and solutions for insurance-related issues such as delayed or denied insurance claims and mis-selling of insurance.
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