What is an Endowment Life Insurance Policy

What is an Endowment Policy?

An endowment policy is a form of life insurance that also offers an avenue for reliable savings over the duration of the policy. When a policyholder buys and pays the premium for an endowment policy, a portion of the fund goes towards the life insurance premium and the other half is allocated as savings. An endowment plan is an excellent way to save money regularly over a period of time while also getting life insurance coverage.

The main benefit of an endowment insurance policy is that if the policyholder survives the duration of the policy period, the full amount of money invested in the policy is returned to the insured in the form of maturity benefits along with any bonus if applicable. In case of the untimely death of the policyholder while the endowment plan is still active, the sum assured is provided to the beneficiary in the form of death benefit along with any bonus if applicable.

What are the Types of Endowment Plans?

There are many types of endowment plans available in the market to address the different needs of customers. Let’s take a look at the types of endowment plans available and their functions:

• Guaranteed Endowment Plan

Under a Guaranteed Endowment Plan, the policyholder will receive guaranteed benefits at the end of the policy term to the amount of sum assured and any additional bonus if applicable. The beneficiary will also receive the same in case of the untimely death of the policyholder while the policy is still active. A Guaranteed Endowment Plan is a good option for people looking for safe and dependable coverage without any risk.

• With Profit Endowment Plan

Under the With Profit Endowment Plan, the sum assured amount is the same as the death benefit and is provided to the policyholder at the end of the policy term. This sum assured is pre-decided at the time of buying the policy. Moreover, the final payout to the policyholder at maturity is higher than the sum assured as the insurance company also adds bonuses during the active policy period.

• Non-Profit Endowment Plan

Under a Non-Profit Endowment Plan, the sum assured amount, which is the same as the death benefit, is paid out to the policyholder/beneficiary as maturity benefit or death benefit. However, under a Non-Profit Endowment Plan, the policyholder will not receive any additional bonus.

• Low-Cost Endowment Plan

Low-Cost Endowment Plans are made specifically with the purpose of helping the policyholder accumulate funds under a specific time period of time, which are paid out at the end of the policy as maturity. If the policyholder or the insured passes away while the policy is active, the accumulated funds are paid to the beneficiary as the death benefit. These funds are often used to pay off mortgages or other loans.

Endowment Plans Available On Finserv MARKETS

There are two types of endowment policy available at Finserv MARKETS online. Take a look at the table below to understand the two plans:

You can read in detail about both these plans by visiting us at Finserv MARKETS online.

Features of an Endowment Policy

Following are the main features of an endowment that you should know:

• Death Benefit:

In case of the death of the policyholder while the policy is active, the sum assured along with any additional bonus, if applicable, is provided to the policyholder’s family/beneficiary as the death benefit.

• Investment/Savings:

As mentioned above, one of the most important features of an endowment plan is the investment and savings aspect. An endowment plan allows you to save money for the future while providing life insurance cover at the same time.

• Maturity Benefits:

In case you live through the whole duration of the policy, the sum assured along with any additional bonus will be paid to you as the maturity benefit.

• Flexible Premium Payments:

At the time of buying the policy, you will have the option to choose the frequency of your premium payments. You can choose to pay your premiums yearly, semi-yearly or quarterly.

• Additional Riders:

You can also choose to add extra riders over your basic endowment policy for enhanced protection. Riders such as accidental death cover, critical illness cover, etc. are a good way to get any specific coverage you may need at affordable rates.

Benefits of an Endowment Policy

• Tax Benefits:

Investing in an endowment plan provides a host of tax benefits. The premiums paid are eligible for tax deduction under Section 80C of the Income Tax Act, while the payout is tax-exempt under Section 10(10D) of the law.

• Guaranteed Savings:

Choosing an endowment plan ensures that your savings remain secure as investments and are returned to you after the policy period ends.

• Bonus:

Many endowment plans also have a provision for bonuses where the insurance company adds bonuses to the policyholder’s investment, thereby providing a higher return.

• Dual Benefit:

An endowment policy is a unique plan in the sense that it fulfils two purposes- provides life insurance cover and serves as a tool for savings/investments.

• Low Risk:

The returns from an endowment plan are guaranteed and the risk is minimal. A majority of endowment plans are not market-linked and are hence unaffected by market fluctuations.

Why Should You Invest in an Endowment Policy?

There are many reasons why you should consider investing in an endowment plan. Given below are some of the main reasons as to how an endowment plan will be helpful for your future:

• An Excellent Saving Tool:

As a part of the premiums you pay towards your endowment plans are savings, you will have a healthy nest egg of savings/investments at the end of your policy term. As a combination of life insurance and savings, an endowment policy serves as a great way to save your money over time with discipline.

• Life Insurance Coverage:

Apart from being a tool for saving money, an endowment policy also serves as a life insurance policy providing financial coverage to your family and loved ones in the case of your untimely demise. In case the policyholder passes away while the policy is active, the sum assured along with any bonuses(if available) is paid to the beneficiary as the death benefit.

• Serves as a Retirement Fund:

The lump sum amount paid at the end of the policy period as maturity benefits can serve to supplement your retirement funds significantly. The funds can be used post your retirement in multiple ways, such as travel, funding your children’s education, medical bills, etc.

Who Should Buy an Endowment Policy?

An endowment policy can be purchased by anyone who is of an eligible age as an investment and life insurance cover. However, the following people should especially consider buying an endowment policy:

• People looking for risk-free investments:

As mentioned previously, the money invested in endowment plans is extremely low risk and remains secure. People who are looking for a way to securely save money for their future can buy an endowment plan to achieve their goals.

• Young professionals:

It is often suggested that life insurance should be purchased early in one’s career. Young people in their 20s and 30s should invest in an endowment policy as their premiums will be lower and they can save up a significant amount of money by the time their policy period ends.

• People looking for insurance coverage:

People who are looking to buy a life insurance plan to protect their family and loved ones can also buy an endowment plan as it provides the added benefit of savings along with life insurance cover.

• People who want a financial safety-net for retirement:

The premiums you have invested in an endowment plan will create a healthy financial safety net for your retirement.

When is it Appropriate to Get an Endowment Policy?

Anyone who is in the eligible age range can buy an endowment policy. However, people who are in their 20s and 30s will receive the most benefits. At a younger age, the premiums they will have to pay for life insurance will be reduced, whereas the savings they accumulate will grow extensively year by year, creating a healthy corpus of wealth for them at the end of the policy. However, people who are in their 40s and 50s can also buy an endowment plan to supplement their savings and get insurance coverage to protect their families and loved ones financially.

Documents Required to Apply for an Endowment Policy

While each insurance company may have separate requirements in terms of paperwork, you will need the following documents to apply for a new endowment plan at any company:

1. Passport-Size Photographs

2. Birth Certificate/Age Proof

3. Proof of Residence

4. Proof of Income

5. Duly filled application form to be submitted to the insurance company

Things to Consider Before Buying an Endowment Policy

Following are the main factors you should keep in mind before buying an endowment policy:

• Plan Early:

An endowment policy is a long-term investment product and helps in accumulating wealth over several years. It is advisable to start early to boost the final corpus as the power of compounding works over the long term.

• Flexibility:

Payment of premiums on time is a key requisite to receive the entire benefits from an endowment policy. Before investing in a plan, inquire about the premium payment term. Policies for salaried employees have monthly payment terms, while people with irregular income can avail single or yearly premium payments.

• Know the Type of Plan:

There are various types of endowment policies. It is important to know the type of policy before opting for one. You should research the types of endowment plans given above and choose the appropriate one as per your needs.

• Opt for Plans with Riders:

You can choose to enhance the insurance coverage of an endowment policy by choosing a critical illness rider or an accidental death rider. Choose a policy that offers a wide variety of riders so that you can customise it as per your requirements.

• Bonuses:

Some endowment plans add to the savings by paying regular bonuses. The bonuses are paid from the profit that the insurer makes by investing the amount paid as premiums. Choose a policy that pays bonuses as they offer higher returns.

• Non-Guaranteed and Guaranteed Returns:

Not all endowment policies guarantee returns. Some plans have a component of guaranteed returns and some are with non-guaranteed returns. Know about the policy in detail before investing.

How Does an Endowment Policy Work?

An endowment policy is a simple product. The policyholder has to opt for a policy period, such as 10 years, 15 years, etc. and has to finalise an annual premium. The policy provides life insurance cover for the agreed tenor and guarantees a lump-sum payment at the end of the term. The lump-sum payment can be used to meet your financial goals. Like you have read above, some endowment plans also add amounts known as bonuses at regular intervals, which boost the final returns from the plan.

Claim Process of an Endowment Policy

The claim process for an endowment life insurance policy is fairly straightforward and quite similar to that of a life insurance policy. Here are the steps to claim an endowment policy:

• Apply for claims with insurance provider:

In case of the death of the policyholder/insured, the beneficiary will need to apply to the insurance company for the claim.

• Submit relevant documents:

The beneficiary will need to submit all the relevant documents such as the policy papers, death certificate and other documents as asked by the insurance provider.

• Verification:

Once the claim application and the documents have been successfully submitted, the insurance company will investigate to verify that the claim is legitimate and there is no foul play. This process generally takes about 6 months.

• Settlement:

Once the insurance company has verified the claim request to make sure everything is in order, the sum assured along with any benefits, if eligible, will be paid to the beneficiary as the death benefit.

Why Choose Finserv MARKETS for an Endowment Plan?

An endowment plan protects you and your family financially; however, it is important that you buy one from a reputed and reliable source. When you buy an endowment plan on Finserv MARKETS, you can ensure that you are dealing with one of the leading financial services firms in the country and that your investments are fully secure. Here are a few more reasons you should choose to buy an endowment plan available on Finserv MARKETS:

• Instant Policy Issuance:

Buying any policy through Finserv MARKETS is swift, safe and easy. You can buy an endowment policy in a short amount of time by following a series of straightforward steps online through the Finserv MARKETS website.

• High Claim Settlement Ratio:

One way to measure the reliability of an insurance company is through its claim settlement ratio. A higher claim settlement ratio is an indicator that the insurance provider is legitimate and trustworthy. Bajaj Allianz Life is a trusted insurer and has a high claim settlement ratio. With the endowment plans available on Finserv MARKETS, you can enjoy a quick settlement.

• Hassle-Free Process:

Buying an endowment plan through Finserv MARKETS is a hassle-free process with no complications and minimal paperwork.

Now that you know an endowment insurance policy offers financial security to your loved ones, tax exemption to you, and a goal-based savings option, head over to our ‘Insurance’ page and check out the plans now.