5 Things To Know About Endowment Policy

An endowment policy is a type of an insurance plan that offers guaranteed benefits to the insured in the form of a total sum assured along with other bonuses upon the maturity of the term or to the nominee(s) of the policy in the event of his/her death before the policy matures. An endowment policy plan is basically a type of insurance instrument that acts as savings apart from the added benefits.The policy offers two options, either the nominee gets the sum assured in the event of policyholder’s demise, or the endowment policy gives the policyholder the maturity bonus along with the sum assured in case he/she survives the policy term.Endowment policy comes with two clauses - ‘with profit’ and ‘without profit’. With profit endowment policies are entitled to various terminal and reversionary bonuses that are paid, along with the sum assured, upon maturity, thereby offering additional fund benefits. Whereas, in the case of non-profit endowment policy does not have any benefits and can be counted as a traditional term insurance plan.

1. Death benefits with maturity payouts: One of the best benefits of an endowment policy is that it offers guaranteed benefits to the policyholder along with additional bonuses upon surviving the maturity and also entitles the nominee to receive the sum assured in the event of the demise of the policyholder. An endowment policy thus offers death benefits along with policy survival benefits.
2. Higher returns: The fact that an endowment policy offers additional bonuses proves that it offers higher returns than any traditional life insurance policy or any other term insurance plan. The plan offers the regular sum assured along with additional payable amounts.
3. Flexible premium-payment terms: The insurers offering an endowment policy are known to provide flexibility in premium-payment terms. This enables the policyholder to make the premium payment at his/her convenience, which can be annual, bi-annual, monthly, or even a one-time lump sum amount.
4. Flexibility coverage: Endowment policy offers flexibility in terms of coverage too where the policyholder is given a choice to purchase the additional benefits in the form of riders such as critical illness riders, partial/total disability riders, accidental death rider, etc. Although this affects the payable premiums, the scope of coverage becomes flexible.
5. Tax benefits: Endowment policy offers income tax benefits as the payable premiums are tax-deductible under Section 80C and the maturity benefits are tax exempted under Section 10(10D) of the Income Tax Act of India, 1961.

There are various online portals that offer various term insurance policies, including endowment policy for financial coverage.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.