Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
- Guaranteed@ Income Benefit for upto 25 years
- Flexibility to choose income period
- Premium break for females on child birth or any listed specific illnesses
- Life cover for the premium payment period
- Enhance your life cover with rider offerings
ARN. No. KLI/23-24/E-BB/1201
Features
- Increasing Life Cover*
- Guaranteed^ Maturity Benefits
- Enhanced Protection Through Riders
- Tax Benefits
- Dual Benefits: Guaranteed^Maturity + Death benefits
Ref. No. KLI/22-23/E-BB/999
What is an Endowment Plan? Meaning, Features & Benefits
Endowment plans combine the protection of life insurance with a savings plan to build a lump sum amount at maturity.
- 39,466 Views | Updated on: Jul 22, 2024
There is no denying that everyone wants a long and happy life for themselves and their loved ones. This is where life insurance has gained immense popularity. It not only protects your loved ones after your untimely death or disablement but also offers a secure, happy, and fulfilling post-retirement life that you can enjoy with your whole family.
Do you wonder what is endowment plan or why it has gained immense popularity? Let us dive deeper to know what is endowment plan and how it works.
What is an Endowment Policy?
An endowment plan is a kind of life insurance plan that provides coverage in any unfortunate event. It also offers a maturity amount at the end of the policy term. An endowment plan can be beneficial for people looking to secure their family’s future and provide them comfortable life in their absence.
How Does an Endowment Policy Work?
Before buying an endowment plan, it is necessary to know how it works and why is it beneficial for you.
In an endowment plan, you pay regular premiums over a set period. In lieu of this payment, the insurance company invests a portion of your premiums and grows them over time. At the end of the policy term (maturity), you receive a lump sum payout, which includes the sum assured (guaranteed amount) and any bonuses accrued.
In case you pass away during the policy term, your beneficiaries receive the sum assured, providing financial security for them.
Types of Endowment Life Insurance Policy
Now that you know what are endowment plans, let us take a look at their types. There are several types of endowment life insurance policies, each with its own features and benefits.
With-profit Endowment Policies
With-profit endowment policy is also known as participating endowment plans. It offers guaranteed benefits (sum assured) at maturity and potential bonuses based on the insurance company’s performance.
Unit-linked Endowment Policies
These are market-linked insurance plans where a portion of your premium goes towards investment in units of mutual funds. The maturity benefit depends on the fund’s performance. These plans offer higher potential returns but come with market risks.
Non-participating Endowment Policies
Suitable for those seeking fixed returns and predictability, these plans offer guaranteed sum assured and maturity benefits at the policy’s outset. However, no bonuses or profit sharing is provided by the insurance company as these are not linked to any market-related plan.
Limited Premium Payment Endowment Policies
Limited premium payment endowment plan allows you to pay premiums for a shorter period but provides coverage for a longer term. These plans have higher premiums within payment terms and are more suitable for those with a limited window for a high-income generation.
Money-back Endowment Policies
Money-back policies offer periodic payouts throughout the policy term along with the maturity benefit. They provide liquidity through periodic payouts and can be helpful for short-term financial needs.
Features and Limitations of an Endowment Policy
Now that you know the types of endowment plans, let us take a look at the features and limitations of an endowment policy
Features
- Combines life insurance with a savings plan.
- Guaranteed maturity benefit + potential bonuses.
- Disciplined saving & tax benefits (may vary).
- Choose from various policy types (traditional, market-linked).
Limitations
- Lower returns than some investments.
- Limited access to money before maturity.
- Fees and charges for maintenance.
Why Must You Apply for an Endowment Plan?
An endowment plan offers apparent benefits to the policyholders. It offers a secure way to save and grow your money while protecting your family’s future. When the endowment insurance policy matures, the policyholder has a pool of savings. They can either reinvest the amount, use it for their personal needs or enjoy life post-retirement. Therefore, an endowment policy is almost risk-free and offers a steady amount on a fixed date as long as the premium is paid.
Key Takeaways
- Endowment plans combine life insurance benefits with a long-term savings plan for policyholders.
- It offers a guaranteed sum assured payout at maturity, plus potential bonuses.
- You can choose from different policy types, like traditional or market-linked plans, to suit your risk tolerance.
- Endowment plans have lower returns compared to some investments and limited access to money before maturity.
Conclusion
With several investment plans in the market, it has become tough to choose one. However, when it comes to stable and growth-centered investment products, endowment plans have always been investors’ first choice. These plans offer the benefit of lump sum payment in case of any mishappening. If you want to secure your family’s future, then an endowment plan is your solution. So, do not waste time and invest in an endowment plan today!
FAQs on What is Endowment Plan
1
What is the endowment benefit?
The lump sum of money you receive at the end of the policy term, including the guaranteed sum assured and any bonuses, is an endowment benefit.
2
What is the endowment plan for?
An endowment plan helps you save money over time and provides life insurance coverage. It’s ideal for long-term financial goals like retirement or education.
3
Is it good to invest in an endowment plan?
Endowment plans offer guaranteed returns and life insurance but lower returns than some investments and limited access to your money. You should consider your risk tolerance and goals.
4
What are the bonuses associated with an endowment life insurance policy?
With-profit endowment plans offer bonuses based on the insurance company’s performance, increasing your maturity benefit.
5
What happens if I stop paying premiums?
Your policy may lapse, meaning you lose coverage and may only receive a surrender value (less than premiums paid).
6
Is the maturity amount guaranteed in an endowment life insurance policy?
Yes, in most cases, traditional endowment plans offer a guaranteed sum assured benefit at maturity.
Suggested Readings
1. 8 Popular Tax-Saving Schemes in India
2. What is the Maximum Maturity Benefit in Assured Savings Plans?
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.
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
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
- Guaranteed@ Income Benefit for upto 25 years
- Flexibility to choose income period
- Premium break for females on child birth or any listed specific illnesses
- Life cover for the premium payment period
- Enhance your life cover with rider offerings
ARN. No. KLI/23-24/E-BB/1201
Features
- Increasing Life Cover*
- Guaranteed^ Maturity Benefits
- Enhanced Protection Through Riders
- Tax Benefits
- Dual Benefits: Guaranteed^Maturity + Death benefits
Ref. No. KLI/22-23/E-BB/999
