Endowment Plan
Endowment plan is a life insurance policy which provides you with a com-bination of both i.e.: an insurance cover, as well as an savings plan. It helps you in saving regularly over a specific period of time, so that you are able to get a lump sum amount on policy maturity, if the policyholder sur-vives the policy term.
The policyholder gets his/her sum assured on a fixed date in future as per the policy terms and conditions. However, in case of sudden death of the policyholder, the insurance company will pay the sum assured (plus the bonus, if any) to the nominee of the policy. Besides, it is also useful to se-cure yourself or your family post-retirement or to meet various financial needs such as funding for children's education and/or marriage or buying a house.
Who should buy Endowment Policies?
- Individuals having a regular stream of earnings and who require a lump sum after a certain period of time should consider purchasing endow-ment plans.
- Endowment plans offer a disciplined route for building a corpus, which will help the dependents of the insured in case of financial contingen-cies.
- Small businesspersons, salaried individuals, and professionals like lawyers and doctors must buy endowments plans to meet their long-term financial goals.
- Endowment plans are an ideal option for people who do not mind set-tling for fewer returns and are risk-averse.
Types of Endowment Plans
There are three types of Endowment plans that you can choose from
Unit Linked Endowment Plan
Under Unit Linked policies, the insur-ance premiums are bifurcated into multiple units held under a specific investment fund which can be chosen by the policyholders.
Full /With Profit Endowment
Under this plan, the basic amount i.e. sum assured will be provided to the policy holder. This amount is guaranteed right from the start of the policy. However, the final pay-out provided is comparatively higher depending on the bonuses an-nounced from time to time by the company. The bonuses once de-clared form a part of the policy are paid out in the event of death of the policyholder or maturity of the policy.
Low-Cost Endowment
This type of endowment plan was designed with an intention of allowing the policyholder to accumulate the funds which have to be paid after a specified time period, usually mortgage.
Non-profit Endowment
These are endowment plans which do not participate in the profits generated by the company (bonuses). How-ever, in order to make them competitive against other products, com-panies offer guaranteed additions in these plans which help in gen-erating returns for the policy holder.