5 Key Benefits of Endowment Plans

benefits of endowment plans

source: indianmoney

Life Insurance plans let you financially protect your family in case of your death. Whereas, in endowment plans, you get to enjoy regular savings for the future and ensure a life cover simultaneously. 

Thus, you can get a lump sum maturity benefit to secure your financial needs, and with the sum assured value, you can also stay assured that your family will not have to face financial difficulties. Before you proceed with your purchase, let’s uncover all the benefits of an endowment policy.

What Are the Benefits of Endowment Policy?

the benefits of endowment policy

source:maxlifeinsurance

Here are all the benefits you can get by staying covered with an endowment policy:

High Liquidity

Compared to other term or health insurance plans, endowment policies are highly liquid. You can foreclose your insurance plan during financial challenges. You will get the total premium you have paid along with the bonus and interest accrued until that date.

Nevertheless, you need to check the lock-in period of your plan. Generally, it is around 2-3 years. In such a scenario, you can get the foreclosure advantage of the endowment policy only after the 2-3 years of the lock-in period.

Insurance-Cum-Investment

The endowment policy provides customers with life cover and an investment opportunity at the same time. The family members will get the full sum assured value if the insured person succumbs to death before the policy term ends.

On the other hand, if the customer survives till the term ends, the insurance company will be liable to deliver the maturity value. The customer can then leverage the corpus as they wish.

Tax Deduction

Under Section 80(C), you can enjoy the tax benefits on the premium amount of your endowment policy. Further, Section 10(10D) also makes the guaranteed sum assured amount free from any tax obligations. By leveraging these benefits of endowment plans, you can reduce your tax obligations to a large extent.

Loan Against Endowment Plan

You can use your endowment plan as a collateral while taking a secured loan. This way, with the help of your policy documents you can get financial assistance during dire financial shortages. You do not need to collateralise your physical properties as security.

Low Investment Risk

The investment corpus of an endowment plan is less risky. Insurance companies abide by strict mandatory rules to maintain and manage all the funds they receive from customers. As a result, you can stay assured about the fund value and premium you pay against

The endowment plans let you build a corpus for the future as maturity benefits and enjoy a life cover at the same time. Besides these major benefits of an endowment policy, you can also enjoy tax deductions, purchase riders and liquidate your policy. All these lets you obtain enhanced financial backup for you and your family.

FAQs about Benefits of Endowment Plans

hat is the maturity benefit of an endowment plan?

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Maturity benefit of an endowment plan refers to the amount you will get if you survive the term of your policy. Generally, as a maturity benefit you will get at least the guaranteed sum as agreed on during the purchase of your policy. However, the loyalty benefit and yearly additions can increase the total value of maturity benefit.

Can you withdraw money from your endowment plans?

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Yes, there are some endowment policies that allow policyholders to withdraw funds on a yearly basis. A withdrawal will decrease the amount of your returns and final maturity amount. However, all endowment policies do not come with this option.

Which documents do I need to submit while purchasing an endowment plan?

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You need to submit the following documents while purchasing an endowment policy:

  • Photo Identity Proof (Passport, voter ID card, Aadhaar card, etc.)
  • Income Proof (Salary statement)
  • Medical examination report

Are endowment policies good investment instruments?

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Endowment policies can be safe and sound from the investment perspectives. You can get a significant return over a long time horizon. You can also keep your money invested in an organised and disciplined way. Plus, the life cover is an added advantage of this policy.

Can I add riders to broaden the coverage of my endowment plan?

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Yes, you can add riders with your endowment policies at only a little extra cost to enhance the overall coverage. You can purchase riders like accident cover, critical illness cover, etc., on top of your plan, considering your requirements. At a slightly extra premium, you can significantly raise the financial protection of you and your family.

Disclaimer

  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.