Health

Trying to make sense of ‘endowment policy’? Read on for a holistic understanding of an endowment plan

An endowment plan is a variant of a life insurance policy that offers you the dual benefit of savings as well as insurance. If you purchase an individual endowment plan for yourself, you can save a good amount of money over a specific period.

When the plan gets matured, you gain a lump sum amount as a benefit. Moreover, the endowment policy also provides you life insurance that assures payment of the assured sum, along with accrued bonuses to your nominee in case you die during the tenure of your policy.

Now that you know what is an endowment plan, you might be tempted to invest in it. An endowment policy is considered to be one of the best investments that allow you to meet your long-term financial goals such as the marriage of your children or their education, planning for your retirement, or purchasing a house. However, before you go ahead and give your capital to insurers, you need to know several other things about this policy as well.

This guide aims to be a comprehensive resource for you to learn about endowment plans.

Endowment Plans – What are Their Different Variants?

The endowment plan has been made available in several different variations, each with its features and benefits. Here’s a list of some of the most common types of endowment plans available in India:

1. With Profit Endowment Plan

Often known as a full endowment, this with-profit policy offers a defined basic sum as a death benefit to your dependents. On the assumption of growth during the tenure of this policy, the final payout will be significantly higher than the sum assured during the beginning of your policy.

2. Non-Profit Endowment 

These variants of endowment plans don’t keep any of the profits produced by the company in the form of bonuses. However, to provide it an edge over the other plans available in the market, it offers the assurance of guaranteed additions that help you gain amazing returns from this policy.

3. Unit Linked Endowment Plan 

The unit-linked endowment plans divide the premiums that you’ve paid throughout the tenure of your policy into several separate units that are used to hold specific investment funds made available by the company and chosen by you.

Things You Need to Know Before Investing in Endowment Plans

If you’re reading this far, you’ve taught yourself about what is an endowment policy and its different types – pat yourself for it.

Keeping the progress ongoing, let’s take a look at things that you must know before heading to purchase an endowment plan:

1. Start Earlier 

The best thing about endowment plans is that they are long-term by their nature. In simple words, the longer you’re able to extend the policy period, the better benefits you or your dependents will likely receive in form of the overall policy benefits.

2. Numerous Bonuses

Depending on the type of investment company you choose, the endowment plan can provide you several bonuses that help you increase your final lump sum as well. If your chosen insurance company is performing well, you’ll surely receive several additional bonuses.

If you’re wondering why an insurance company gives money for free, you need to know that the company invests your capital, and with the help of profits gained through it, you gain your additional bonuses under your policy. The profit share is divided at the end of the financial year only.

3. Several Riders 

There are several riders made available to you by insurance companies as a part of your purchased endowment plan. These riders can help you greatly to increase and enhance the coverage of your policy to be able to make the most out of it.

4. Flexible Payments

If you are a salaried individual looking for a good investment plan that fits under your budget, you can certainly opt-in for endowment policies. There are several payment options available under this plan that allows you to pay the premiums as per your comfort.

Types of Riders Available with Endowment Plans 

The discussion has gone way beyond just what an endowment plan is. Talking about riders, they’re known as the provisions of an insurance policy that can be added to your coverage or the terms of your policy. Most of the riders require an additional amount to be added to your plan.

There are several types of riders that are made available by your insurance company to help you make necessary changes in your policy and increase its effectiveness. Here’s a list of some of the most helpful riders that you can consider choosing with your endowment plan:

1. Critical Illness Cover

With the help of a critical illness cover rider, you can be entitled to gain a lump sum amount of money in the event of being diagnosed with any kind of critical illness. This will help you cover the cost of your treatment, and prevent making a burden on the family.

2. Accidental Death Cover

Along with the death benefit under your policy that will be received by your dependents after your demise, you can also use an accidental death cover rider to provide an additional corpus of money to your family and loved ones to make their future financially secure.

3. Hospital Cash Benefit 

If you add the hospital cash benefit rider to your endowment plan, you can become entitled to receive daily allowance as well as post-hospitalization benefits in case you get admitted to a hospital for any medical concerns or diseases.

4. Disability

If you’re diagnosed with any kind of partial or permanent disability, then you must add the disability rider to your endowment policy. This allows you to enjoy several additional offers that may help you extend the benefits promised by the plan.

The Takeaway

Hopefully, this post has helped you in understanding what an endowment plan is, its different types, and a lot more other information on the same. Make sure you keep all the aforementioned tips in mind while proceeding to purchase an endowment plan for yourself.

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