Basics of Endowment Insurance Policy

Basics of Endowment Insurance Policy

What is endowment policy/endowment insurance plan: Endowment policy is an investment cum insurance product offered by insurance companies.

Majority of the people chose endowment policies when they want to save money with minimum guaranteed returns with insurance benefits for long term.

When it comes to savings or having a long term policy, Endowment Policy is one of the most accepted forms of term plan.

The buyer gets a guaranteed return of money after contracted period of time which is known as ‘maturity’ period or at the death of the insured. The maturity period can be 5, 10, 15 or more years.

Companies like LIC, ICICI Prudential, Kotak Life Insurance, Aviva Life Insurance are very much popular for offering endowment policies.

There are different kinds of endowment policy plans available in the market. Some of them are:

In Full Endowment Policy you will be assured of the basic sum of money that is equal to the death benefit. The premium will be invested and you will receive a yearly bonus and the return on maturity depends on the rate of annual growth.

Unit Linked Endowment Policy is a fixed term plan that gives you life coverage. The investment is linked to market shares and the return depends on the performance of your investment.

In Profit Endowment the value of units is calculated in such a way that it constitutes the minimum maturity amount. It is linked to market without risking your basic investment amount.Low Cost Endowment Policy is calculated anticipating the future growth rate and the target amount is considered as the minimum guaranteed sum. [/list_item]

In Non Profit Endowment one does not earn any bonus.

Advantages of endowment insurance policies

  • It comes with dual benefit of savings and insurance.
  • Long term investment with assured lump sum return.
  • One can pay short period premiums and enjoy the benefits of plan over term policy.
  • U/S 80C of Income Tax Act one can enjoy tax benefits on annual premium and U/S 10D the death claim is tax free.
  • Scope for taking loan against policy surrender value.
  • Disadvantages

    • The premium is higher than term plans.
    • Low yielding policy.
    • The surrender value is always less than the total premium paid till that time.