5 things to know before buying an endowment plan

An endowment plan works as a great investment vehicle for individuals looking to build strong financial support and security for the future.

As with any other life insurance policy, one has to pay premiums for a certain term and get a lump sum as the expiration date.

The access to the promised maturity amount, survival benefits and additional bonuses make it a profitable option.

However, before such a policy is implemented, there are certain aspects that individuals should consider before purchasing the endowment plan.

Factors to Consider Before Buying an Endowment Plan

Looking at the meaning of endowment insurance, one can understand that it is not just a life insurance. It pays out a large one-off amount at the end of the term or in the event of death.

The lump sum for which the policyholders or their nominees are eligible can help them meet the necessary financial requirements.

To get the most out of the benefits, individuals should check the important aspects related to this particular policy. Find these factors below:

1. Premium Payment Terms

The premium payment conditions that insurers offer on endowment insurance continue to change. Policyholders are given sufficient flexibility in terms of premium payment.

This means that one can choose any premium plan whenever it suits them.

Suppose that regular premium conditions work better for salaried employees. Others can also opt for semi-annual, monthly or even single premium payments.

When buying an endowment plan, one has to check other financial obligations and choose the payment date accordingly.

2. Additional riders

With such an endowment policy, individuals get the convenience of going for additional riders and committing to their plan.

This inevitably helps them improve the coverage of their policies and get additional benefits to secure their future.

Riders such as critical illness coverage, total or partial disability coverage, accidental death coverage, etc. are generally available on top of these endowment plans.

Individuals can choose from them according to their needs.

3. Premium amount

The exact premium amount to be paid each year should be checked beforehand. If someone decides to go for extra riders, they should estimate the exact amount based on that.

The premium amount is usually increased when a policyholder opts for drivers.

Therefore, it is necessary to compare different insurance aggregators and the premium amounts to be paid before making a decision.

4. Income Tax Benefits

Under Section 80C of the Income Tax Act, 1961, individuals with a gift policy can claim tax deductions up to Rs.1.5 lakh.

This specific tax exemption is generally available on the premium paid for a particular financial year.

Therefore, if you are going for such a life insurance policy, make sure you understand the tax benefits available.

In this way, one can save a considerable amount even after paying a large amount of insurance premiums per year.

5. The type of endowment plan

Reputable insurance aggregators offer a variety of endowment insurance policies.

From a low-cost endowment policy to a limited-pay endowment policy, unit-linked insurance policies, an endowment policy for joint life insurance policies, etc., individuals are given multiple options to choose from.

Since each of them comes with a specific set of features, be sure to review the applicable benefits before choosing one.

Online aggregator platforms present a large number of policies from leading insurance companies of this country. Individuals can now compare and get to know them in detail to find one that meets their requirements.

Apart from these aspects, individuals should also pay attention to the ratio of claims settlements, bonus percentages, quality of customer service, etc., before investing in an endowment plan.

Please note that certain inclusions and exclusions apply to each type of policy, which vary by insurer.

It is therefore essential to compare them in order to obtain the greatest possible financial protection for themselves and their loved ones.

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