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Things to Know Before Buying an Endowment Plan

An endowment plan is a savings plan that offers you the opportunity to save and grow your money to provide financially secure coverage to you and your family members.

  • 5,647 Views | Updated on: Mar 20, 2024

“Save money, and money will save you”

Savings and investing can sound the same, with one single difference. You save a small amount every month. It is saved, but it does not grow. Investing your savings will help you grow your money. It is incredibly crucial to keep aside a part of your earnings to meet uncertain future requirements.

Furthermore, setting aside a part of your income will help to give you the financial freedom to fulfill all your needs. An endowment plan is one such saving plan that offers you the opportunity to save and grow your money to provide financially secure coverage to you and your family members.

What is an Endowment Plan?

An endowment plan is a life insurance plan that, apart from offering life coverage to the insured, helps the policyholder save regularly over a specific time to get a lump sum amount whenever the policy matures. This maturity amount can meet various financial needs like funding one’s retirement, children’s education and marriage or buying a house. Also, the total amount is paid to their beneficiaries in case of the policyholder’s demise. Therefore, it is a life insurance plan with a saving component and a lump sum maturity benefit.

Features of Endowment Policy

Endowment plans provide a disciplined route for savings. Salaried people, small business people and professionals should look for this savings plan to meet their long-term financial security goals. Also, risk-averse individuals who do not mind settling for a lesser return than taking additional risks should go for an endowment plan.

Below mentioned are some of the features of an endowment life insurance policy:

Life Cover

In case of the sudden demise of the policyholder, the beneficiaries stay financially secure under the endowment plan as they are paid the sum assured amount. Thus this plan offers death benefits to the nominee.

Maturity Benefits

This plan’s unique feature is that it benefits the policyholder on the plan’s maturity. Then, on the completion of the tenure, the policyholder gets the sum assured along with the maturity benefit.

Premium Payment

Endowment policy offers flexible premium benefits to the policyholder. They can select the premium amount at their convenience. They can either opt for a monthly, half-yearly, or annual premium payment mode or even choose to pay the entire amount simultaneously.

Tax Benefits

Under Section 80C of the Income Tax Act, 1961, the endowment policyholder can claim deductions of an amount up to ₹1.5 lakh for premiums paid in a financial year.

Who Should Buy an Endowment Plan?

An endowment plan can help build up a corpus amount through disciplined savings. Therefore, this amount can be used to meet long-term financial goals or any unexpected emergencies. In addition, you can use these savings for buying real estate, saving for your child’s education, or providing financial coverage to your family after you. Hence, this plan benefits those looking for intelligent saving methods to ensure financial security.

Reasons to Buy an Endowment Plan

Now that you know what an endowment plan is and the features of an endowment policy, let’s move forward to understand the reasons behind buying an endowment plan. Keep scrolling through to know the details:

  • An endowment plan is required to safeguard your loved ones against economic hardship after an unfortunate event.
  • It helps the policyholder create a corpus to meet the life goals through regular savings.
  • Also, this plan helps the policyholder by offering the tax deduction benefits per the prevailing tax laws.

All these reasons make an endowment plan worth purchasing.

Conclusion

If you are looking for goal-based savings or a plan to ensure security for your family, then you should invest in an endowment plan as soon as possible. Early investing helps ensure that your premium amount is not too high, and you can save a considerable amount. With the benefit of offering financial security to your family against life’s uncertainty and creating a corpus saving for the future, an endowment plan is considered the intelligent buy to achieve your financial targets.

- A Consumer Education Initiative series by Kotak Life

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

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