Endowment Plans: How They Work, Benefits, And Who Should Get One
It is easy to come across financial advice that encourages younger people to start creating financial stability as early as possible. For some, it may seem easier said than done. While there is no denying that managing your finances early can pay off in the long term, many can find it difficult to do.
Building the foundation for your financial stability, at any age, requires you to focus on at least two aspects. One of these is building your wealth for a safer and happier tomorrow. The other is protecting yourself and your family against uncertainties, i.e., insurance. For someone young, or at a place in life where financial stress or obligations prevent them from fulfilling both these motives at the same time, endowment plans may be the answer. These plans allow you to get the protection of life insurance while also offering guaranteed returns to secure your future.
Are these plans right for you? Before that can be answered, it is necessary to understand what an endowment plan is and what it offers.
What Are Endowment Plans?
If you are looking for a life insurance plan that offers more than a life cover, but without much risk involved, you may not have to look further than endowment plans. To put it simply, endowment policies are life insurance plans that come with the benefits of savings plans. These offer guaranteed returns upon the survival of the life assured, and thus, are also termed guaranteed return plans.
Suppose a consumer buys an endowment plan for a duration of 20 years. They maintain the policy well and pay all their premiums on time. If they were to pass away before the policy matures, their nominee may make a claim and receive the death benefit from the plan. On the other hand, if they were to survive the policy duration, they should receive the maturity benefits from the policy. The amount they receive is based on their premium amount and other policy factors. Consumers may use an endowment plan calculator to get a better idea of the survival benefits they may receive.
Endowment Plan Benefits
There are various sub-types of endowment plans available today. While their minutiae vary from one another, all these plans offer some common benefits.
- Life cover: At the core of all endowment policies is the benefit of having a life cover. You can focus on creating a better tomorrow once you know your family’s future is made safer with this plan.
- Low risk: Since most endowment plans offer guaranteed returns, you may not have to worry about what benefits you may expect when the plan matures.
- Flexible duration: Depending on the plan, consumers can opt for a policy duration of as low as 10 years or as high as 40 years. Thus, it allows you to align your policy with your needs.
- Rider options: As with most other life insurance plans, these should also offer you a selection of riders to choose from. This should allow you to customise the plan further.
- Potential Bonuses: In the future, your insurance provider may declare a bonus, such as a revisionary bonus or terminal bonus. If so, you can expect additional gains from your plan.
- Tax benefits: The premiums you pay as well as the benefits you receive may be eligible for tax exemptions or benefits.
Should You Get One?
Whether an endowment policy is an apt choice for you depends on what you are looking for. The plan should suit consumers who are looking for a low-risk option that allows them wealth creation as well as life cover. While the premiums for such plans may not be the lowest, the dual benefits may make up for the same. Most of these plans will allow you to choose a duration as low as ten years. Thus, you may opt for this plan if you are looking for short-term life cover while being able to fulfil your growth goals.
There are multiple endowment plan options available today. To ensure that you choose what suits you best, take the time to compare plans and learn more about their features. Once you have made a choice, you may easily buy the policy online or offline.