Endowment plans are insurance plans that offer guaranteed benefits in the shape of total sum assured along with various bonuses to the policy holder upon the maturity of the term of the plan or to the nominee(s) of the policy holder in the event of her/his demise before the term maturity. Endowment plans are basically insurance instruments that offer added advantage of providing savings option to the investor. An endowment plan offers main plan benefits i.e. sum assured to the nominee(s) of the policy holder in the event of the policy holder’s demise during the policy term and also entitles the policy holder to receive the maturity bonuses in case she/he survives the policy term.
Endowment plans come with the two separate clauses of “with-profit” and “without –profit”. A profit-oriented endowment plan comes with a range of reversionary and terminal bonuses that add to the main sum assured upon maturity of the plan and therefore, offer extra fund benefits. A non-profit endowment plan has no such benefits and can be seen as a traditional life insurance plan. An endowment plan has the beneficial feature of offering lump-sum payouts. This feature encompasses the maturity proceeds as well as the main plan benefits i.e. the sum assured. This means that the policy holder can receive the lump-sum payout of the money upon term maturity and thus, has the option of further investing the funds as and when required. An endowment plan can be purchased as per the required needs and financial goals of the investor and there are no rigid or pre-fixed rules regarding the policy term.
Following are the five things to know before purchasing an endowment policy:
1. Death along with survival benefits:
Endowment plans are unique in the sense that the these plans guarantee the payment of benefits to the policy holder in the event of she/he survives the term of the plan and also entitles her/nominee(s) to receive the sum assured together with other additional bonuses in the event of the policy holder’s demise during the plan term. Therefore, an endowment plan offers death benefits along with policy survival benefits.
2. Higher returns:
The feature of extra bonuses means that the overall returns from an endowment plan tend to be higher than that from any traditional life insurance plan or term insurance plan. Since apart from the regular sum assured, additional payable amounts are combined, hence the plan benefits are higher.
3. Premium-payment frequency:
Generally the insurers offering endowment plans offer quite flexible premium-payment terms. This means that the policy holder can pay the premium in a frequency chosen as per her/his convenience. The frequency can be monthly, bi-annual, annual or even a one-time lump sum payment.
4. Flexibility in cover:
An endowment plan offers the benefit of flexible coverage and the policy holder can choose to purchase additional benefits in the form of riders like partial/total disability riders, critical illness riders, accidental death rider etc. This impacts the payable premiums but the scope of coverage becomes very flexible.
5. Income Tax benefit:
An endowment plan comes with tax benefits because the payable premiums as well as the main plan benefits (sum assured and the maturity proceeds) are eligible for tax-exemption under Sections 80C and 10D of the Income Tax Act, 1961.
HDFC Life offers various term insurance plans that have been formulated for your extensive financial coverage and ensuring that there are economical terms and conditions for this coverage.
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