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What are the Benefits of Endowment Policy?

Are you tired of living paycheck to paycheck? Do you want to secure your future financially? If yes, then investing in an endowment policy might be the right choice for you. In this blog post, we will explore the benefits of endowment policies and why they are the best investment for your future.

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Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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?

An endowment policy is a life insurance policy that pays out a lump sum of money to the policyholder at the end of a specific term or upon the policyholder’s death. These policies provide financial security and help individuals achieve their long-term financial goals.

Why choose an Endowment policy?

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:

Guaranteed returns

Endowment policies offer guaranteed returns on the investment amount, ensuring that the policyholder receives a lump sum of money at the end of the policy term.

Life cover

Endowment policies offer life cover to the policyholder, ensuring that their family is financially protected in case of their untimely demise.

Maturity benefits

Upon the completion of the policy term, the policyholder receives a lump sum of money that can be used to achieve long-term financial goals such as buying a house, funding their children’s education, or planning for their retirement.

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.

Conclusion

Now that you know the benefits of endowment policies, you can make an informed decision about investing in them. Remember, financial security is essential for a stress-free life. So, go ahead and invest in an endowment policy today. And if you want more information on endowment policies, follow us on social media for regular updates and tips on financial planning. And remember, investing in your future is always a good idea, even if it means sacrificing a few luxuries in the present!

Key Takeaways:

  • An endowment policy is a life insurance policy that pays out a lump sum of money to the policyholder at the end of a specific term or upon the policyholder’s death.
  • Endowment policies offer guaranteed returns on the investment amount
  • It offers life cover to the policyholder

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- A Consumer Education Initiative series by Kotak Life