What are the Benefits of Endowment Policy?
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What are the Benefits of Endowment Policy?

What are the Benefits of Endowment Policy?
  • 16th Sep 2022 |
  • 3,311

Due to the rise in awareness and education, people now understand the importance of risk coverage, be it their life, health, vehicle, house or other assets. As a result of which, insurance has become a must-to-have among people.

The conventional insurance plans work by the rule: pay the premium and get compensated for the loss incurred; if everything goes well, the premium stands null after that covered period. But an endowment plan is not just about covering the losses.

Let us explore the plan and the host of benefits of endowment policy.

What is an Endowment Plan?

The most popular type of insurance among all is life insurance, in the purview of which we pay after a specific interval (monthly, quarterly, yearly) to cover our life, and the sum assured is paid to the nominee in case of the insured’s demise in this covered tenure.

But what if the individual stays fit and fine and leads a good life till his maturity? Will the premium paid by them to the insurance company be of no use then?

Well, just like any other insurance policy, your life will be covered, and in case of any mishap, the nominee will be paid the sum assured. However, if everything goes fine, you will get a good return on the amount you paid as the premium. Hence, an endowment plan not only covers your life but also provides good returns on the amount you paid as a premium, and what could be better than that?

Benefits of Endowment policy

There are various benefits of the Endowment Policy. The most prominent Endowment Policy benefits are listed here:

Tax Benefit

A double endowment policy is a risk coverage of life while also being a good investment plan. If any mishap occurs, the nominee gets the sum assured. At the end of the stipulated term, the policyholder receives the maturity benefit, the sum assured, along with other bonuses (depending upon the plan you opt for).

Insurance-cum-Investment

One of the best endowment policy benefits is the tax exemption it brings. You can claim the tax exemption under Section 80C for the premium paid, and the sum assured received is tax-free under Section 10 (10D). Hence, it is a win-win situation.

Liquidity

An insurance cover, an investment plan, and yet in case of any emergency, you can ask your insurance company to foreclose the policy. You will get the sum till that time, along with the interest amount and bonuses. It is one of the most liquid table types of policy present out there.

Compounded Returns

A double endowment policy returns are paid with the sum assured; therefore, the generated returns are compounded repeatedly, ultimately giving hefty returns to you. These returns are tax-free under Section 10 (10D) of the Income Tax Act as they are part of the sum assured.

Riders’ Benefits

If you wish to add further facilities to your endowment policies, you can add multiple insurance riders for a fractional amount which can cover your health, accidental coverage, double endowment policy, and much more, depending upon your insurance company. These are one of the most popular benefits of an endowment policy, and you are suggested to apply suitable riders to your policy.

Loan against Endowment Policy

Like any other asset, like your house, securities, or stocks, you can avail yourself of loans or bank limits against your endowment policy without disturbing the returns or the benefits of the endowment policy.

Low-Risk Investment Plan

Apart from covering the risk of our lives, the endowment policy benefits include a low-risk involvement. Instead, we could call it one of the safest investment options available as the Insurance companies are governed by strict laws to be followed. It is rated as safe as a Fixed Deposit with the bank with much better returns than the former.

How to choose the right endowment policy?

Opt to pay premiums as per your saving capabilities

Individuals with a consistent source of income can choose the regular premium payment endowment insurance, whilst those with sporadic income can choose the single premium option. Choose an endowment plan that gives you plenty of options for how long you want to pay your premiums and how frequently you want to pay them.

Company credentials

Claim Settlement Ratio

An insurer’s claim settlement ratio is the number of claims settled divided by the number of claims filed: the greater the ratio, the better the insurer.

Solvency Ratio

A life insurance provider with a high solvency ratio is more likely to be financially secure and, as a result, better equipped to pay out your insurance claims and exist for an extended period of time. The greater the ratio, the better its ability to settle claims.

Customer Centricity

The commitment of a corporation to service quality should be prioritised. You, the customer, should always be at the centre of the company’s activities and treated with empathy and understanding.

Digital Strength

Access to online tools at the touch of a button will offer a convenient and hassle-free customer experience for you, whether you are acquiring insurance, paying a premium, renewing the policy, resolving a complaint, or settling claims.

Rider benefits

With an endowment policy, you can also choose additional advantages in the form of riders. You can choose an endowment plan to protect yourself against unpleasant situations such as accidental death, disability, and so on, and therefore enhance your insurance coverage.

Endowment policies offer you the benefit of insurance, investment, savings and asset-building. What else would you want for your investment, if not these many advantages? We recommend that you plan for a double endowment policy and take a first step towards sorting your future life goals.

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