What is Sum Assured in Endowment Policy?

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What is Sum Assured in Endowment Policy?

What is Sum Assured in Endowment Policy?
  • 11th Jul 2022 |
  • 2,961

Endowment policies offer both insurance cover and maturity benefits. Most people find this as a good alternative for investing savings and achieving their life goals. However, the concept of sum assured might sound a little complicated in this case as the product is different. Unlike term life insurance plans, where the sum assured is simply a death benefit, endowment policies are different.

In this article, we will help you understand what endowment policies are and what is sum assured in endowment policies so you are well-aware about the nitty-gritty of the product.

What is an Endowment Policy?

Before taking you all the way directly to endowment policy math, let’s briefly understand what it means.

An endowment policy is a life insurance policy that, along with offering life insurance to the insured, helps the policyholder accumulate money regularly through savings over the specific term of the policy. This gives the policyholder enough corpus by the time the policy matures. In addition, this allows them to get a decent lump sum if the policyholder survives the term. On the other hand, in the case of an unfortunate demise of the policyholder, the nominee is also offered a decent amount as a part of the life insurance under the endowment plan.

The maturity amount that one receives at the maturity of the endowment plan can be used for various purposes like education funding, down payment of house loans, retirement corpus, marriage fund, etc.

What is Sum Assured in Endowment Policy?

Sum assured in an endowment policy is the amount that the policy nominee receives in case of the policyholder’s unfortunate demise. Since an endowment policy is a life insurance product, the policyholder’s life is insured, and the sum assured amount is defined at the beginning of the policy based on factors like how much premium you are willing to pay and what the insurance provider has to offer. Thus, sum assured is the fixed value finalized at the policy enrollment that the nominee will receive in case of the policyholder’s death.

However, if the policyholder survives the entire term of the policy, then they are entitled to receive the sum assured in the form of maturity benefit.

Benefits of an Endowment Policy

In general, any life insurance policy that offers lump sum maturity benefits and a savings component can be termed an endowment policy, be it a ULIP or non-ULIP plan. Although in the financial arena, only a non-ULIP plan with a savings plan component is believed to be an endowment plan. There are multiple benefits of opting for an endowment policy. Here are some of the important ones:

- Wealth Creation: An endowment plan provides the policyholder with an opportunity to build a corpus while being secured with life insurance.

- Bonuses: An endowment plan policyholder is entitled to various types of bonuses. The insurance company declares these bonuses. Bonuses are an extra amount of money additional to the proceeds of investment that are paid by an insurer to the policyholder for various criteria like loyalty bonus, terminal bonus, etc.

- Additional Rider: The endowment plans allow you to add insurance riders to your policy to make it a perfect policy for all your needs. You can add riders like critical illness riders, disability riders, accidental death riders, etc.

- Tax-free maturity benefit: The sum assured and bonuses a policyholder receives upon surviving the policy term are exempted from tax.


There are different endowment policies like the Unit Linked Endowment Plan, Profit Endowment Plan, low-cost endowment plan, no profit endowment, and guarantee endowment policy. Based on the financial requirements and goals, an individual can pick the one that best matches their investment criteria. The endowment policy is an excellent way of accumulating and saving money by cutting wasteful expenditures like window shopping and online shopping addiction.

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