How to Compare Endowment Policies Before You Buy?

An endowment policy serves a dual purpose, that of insurance as well as investment for the future. You can buy insurance for the period you want. If you pass away during that time, the nominee named in the policy will receive the sum assured along with the bonus accrued. It is known as the death benefit.If you are alive at the end of the policy period, you will receive maturity benefits, which is the sum assured plus bonus, if any. Thus, the insurance element protects your loved ones from financial insecurities while the investment element helps you save for the future and offers returns on your investment in the form of bonuses.

There are several types of endowment policies available in India. Before you buy the plan, you should understand what the different types offer, to determine which scheme gives the best returns. Your age, your income and the amount that you can shell out as premium and your risk appetite are some of the factors that you need to take into account while selecting an endowment policy.Compare the costs of the premiums, the track record of the insurance company about the amount of bonus it has been paying to policyholders and in terms of claim settlement, their financial condition and their customer service, before you finalize.Endowment policies also offer different riders. Not every rider may be required in your particular circumstances. Thus, you must understand your future needs andcompare endowment policiesthat provide the best riders for your situation before you make the final choice.

1. Unit Linked Under this plan, you can select the investment funds into which the premiums you pay will be directed.
2. Full endowment The basic sum assured equals the death benefits at the beginning of the policy. Considering market-based appreciation, the amount of the final payout will be higher.
3. Low-cost endowment Under this plan, you will be able to build up a fund that needs to be paid after a certain period, like a mortgage. In the unfortunate circumstances of your demise, your beneficiary will receive the target amount.

Add-ons or riders increase the protection that thepolicy provides. Compare among riders for:

1. Accidental death
2. Disability
3. Critical illness
4. Payment of hospital cash
5. Waiver of premium
6. Accelerated sum assured

The type of rider you need will depend upon your lifestyle. If you travel a lot, accidental death coverage may be useful. If you work in high-risk zones, the disability rider, or if you have a family history of serious ailments, then the critical illness rider might prove prudent.

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.