5 Tips to Buy an Endowment Policy

November 07, 2016

Understanding endowment policies

An endowment policy is a plan that combines the benefit of insurance as well as investment. Such a policy offers insurance coverage, wherein the nominee is entitled to receive the sum assured in case of the policyholder's demise. This provides a high level of financial security, as it helps your loved ones meet their financial obligations even in your absence. Along with an insurance coverage, endowment plans also offer lump sum benefit upon maturity of the policy.
Investing in an endowment saving plan is the best option if you seek to enjoy dual benefits of wealth creation and insurance coverage. You may keep the following five tips in mind while purchasing such a policy.

1. Begin planning early

   Investing early provides a long horizon to invest. This helps you build a huge corpus over time. It facilitates disciplined savings and ensures good returns due to the power of compounding. Investing in an endowment plan at an early age also offers the benefit of getting an insurance coverage at an early date.

2. Know the various types of endowment plans

   In order to invest in an endowment plan, it is necessary to make premium payments frequently. A part of the premium amount is used to purchase a life insurance scheme. The remaining amount is invested in either a profit-basis or non-profit basis type of plan. In a profit-basis type of plan, you may participate in the profits of the company, and vice versa.

3. Choose a plan offering riders

   Many insurance providers offer additional benefits such as double endowment policy, education endowment, or marriage endowment policy. You may keep such offerings in mind while selecting the best endowment plan. Some providers also offer additional riders towards critical illnesses or surgical assistance. These benefits, however, may be enjoyed at an additional cost.

4. Review flexibility options

   There are numerous flexible options to choose from. If you are a fix-salaried individual, you may opt for a regular pay endowment plan. There are flexible options and single pay plans for those with irregular income. You may opt for the best plan based on your inflow of income.

5. Check numerous insurer-related and insured-related factors

   While evaluating features and benefits of multiple plans, make sure to select an endowment policy that is easy to comprehend. Also, take into consideration various factors such as your individual needs, age, income, risk appetite, long-term objectives, and current lifestyle. Additionally, it is important to conduct a research on the insurer's financial position, the premium rates of the plan, customer service record, and bonus rates, among others.
   An endowment insurance scheme is an excellent option that assures financial protection to your loved ones. You may also enjoy the benefits of good returns combined with regular goal-based savings. You may take the above-mentioned factors into consideration while purchasing an endowment plan.

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