Endowment Policy

Endowment policies cover the insured for a specified period. Thus, the insured has the option to insure himself till he wishes to be insured. Upon the death of the insured (during the term of the policy), the nominee receives the sum assured plus the bonus, if any. Bonus is paid for the number of years the policy was in force. Upon maturity, the insured receives the sum assured plus the bonus for the term of the policy, if any. Thereafter, the insured is not covered by the policy. Endowment policies are broadly classified into two types - Endowment - Without profit and Endowment - With profit.


The endowment without profit policies are also known as term insurance plans offer the nominee the sum assured only, upon death of the insured.

Endowment- With Profit: In this type of policy the nominee receives sum assured plus bonus for the number of years the policy was in force in case of policy holder\'s death. In case of survival upto the policy term the insured receives sum assured plus bonus for the term of the policy. These policies participate in the profits of the insurance company.

Best Endowment Plans in India 2018

Endowment Policies

Entry Age(Min-Max)

Maturity Age(Min - Max)

Policy Term

Premium Paying Mode

 Minimum sum Assured

Maximum Sum assured

Premium Paying Term

Reliance Life Insurance Super Endowment Policy

8 - 60 years

22 - 75 years

14 - 20 years

Yearly, Half-yearly, quaterly, monthly

Rs10,000

No Upper Limits

7 - 10 years

Kotak Classic Endowment Policy

8 - 60 years

18 - 75 years

15 - 30 years

Yearly, Half-yearly, quaterly, monthly

Rs61,071

No Upper Limits

7 - 15 years

LIC New Endowment Policy

8 - 55 years

Nil- 75 years

12 - 35 years

Yearly, Half-yearly, quaterly, monthly

Rs 1,00,000 inmultiples of 5,000

No Upper Limits

12 - 35 years

HDFC Life Endowment Assurance Policy

18 - 60 years

18 - 75 years

10 - 30 years

Yearly, Half-yearly, quaterly, monthly

N/A

N/A

10 - 30 years

SBI Life Endowment Policy

18 - 60 years

18 - 60 years

5 - 30 years

Yearly, Half-yearly, quaterly, monthly

Rs75,000

No Limits

Minimum Premium Tenure- Single, Maximum Premium Tenure- 30 Years

Reliance Endowment Policy

5 - 50 years

18 - 60 years

10 - 25 years

Yearly, Half-yearly, quaterly, monthly

Rs65,261

No limits

10 - 25 years

Kotak Premium Endowment Policy

18 - 60 years

18 - 70 years

10 - 30 years

Yearly, Half-yearly, quaterly, monthly

Rs61, 317

No Limits

10 - 30 years

Aviva Dhan Nirman  Endowment Policy

4 - 50 years

28 - 75 years

18 - 30 years

Yearly, Half-yearly, quaterly, monthly

Rs20,0000

Rs10,00,0000

14 - 18 years

Bajaj Allianz Endowment Policy

1 - 60 years

18 - 75 years

15 - 30 years

Yearly, Half-yearly, quaterly, monthly

Rs 1,00,000

No Upper Limits

Premium Paying Tenure- 5 years

AEGON Life Premium Endowment Policy

18 - 55 years

18 - 60 years

Policy Term- 10 Years

Yearly, Half- Yearly, Monthly

10 times of annual premium

N/A

Premium Paying Tenure- 8 years

IDBI Fedral Endowment Policy

18 - 55 years

18 - 100 years

Premium paying term+ Payout period

Yearly, Half-yearly, quaterly, monthly

Rs10,000

No upper limits

12 - 30 years

Guaranteed Policy

Endowment insurance policies guarantee that a sum of money will be given to you or your beneficiaries whether you live until the insurance policy matures or you die early. The face value of an endowment policy will be given to the policyholder on the "maturity date" or to the beneficiary of the life insurance policy in the event the insured dies. The bonuses under the policy are not guaranteed. Thus with endowment policy you get the dual advantage of guaranteed policy benefits and non guaranteed bonues.

Benefits of Endowment Policy

Endowment policies give you the following benefits:
1. They are low risk plans to invest in since the maturity benefits are guaranteed.
2. The endowment policy gives your loved ones financial security.
3. Endowment policies help you avail tax benefits.

Additional Bonus on Endowment Policy

There are various types of bonuses declared by an insurance company. Bonus is an extra amount of money additional to the proceeds, which is distributed to a policyholder by an insurer. Only holders of with-profits policy are entitled to a share in these profits and the payment of this bonus is conditional on the life insurer having surplus funds after claims, costs, and expenses have been paid in particular year.
The bonuses are classified as
• Reversionary Bonus: Additional money added to the amount payable on death or maturity of with-profits policy. Once a reversionary bonus has been made it cannot be withdrawn if the policy runs to maturity or to the death of the insured.

• Terminal Bonuses: A discretional additional amount of money added to payments made on the maturity of an insurance policy or on the death of an insured person.

Rider Benefits

There are various additional rider benefits that are available for you to choose from as per your requirement certain additional benefits are as follows that cater to your comprehensive coverage.
• Accidental Death Benefit
• Accidental Permanent Total/ Partial Disability Benefit
• Family Income Benefit
• Waiver of premium Benefit
• Critical Illness Benefit
• Hospital cash Benefit

Maturity Benefits

pon surviving the term of the policy or upon the end of the policy or maturity, the insured receives sum assured plus bonus for the term of the policy. The amount receivable upon maturity is tax-free. This is the maturity benefit under an endowment policy.

Features of Endowment Policies:

Salient Features of endowment policy are:

  • Death along with Survival benefits: The nominee/beneficiary gets the sum assured along with bonuses, in case of the demise of the insured before the maturity of policy. And, the insured is entitled to get the sum assured if s/he outlives the policy.
  • Higher returns: An endowment plan not only provides financial protection to the family and dependents of the policyholder in case of the unforeseen demise of the insured but also helps build a corpus for the future. Whether it is the survival benefit or death benefit, the payout of an endowment plan can be much higher than that of a pure life insurance policy.
  • Premium Payment Frequency: The policyholder can make regular, single or limited payments of the premium based on the policy chosen by him/her. One can also choose to pay in frequencies on the yearly, half-yearly, quarterly, or monthly basis.
  • Flexibility in Cover: Policyholders can add riders, such as critical illness, total disability, and accidental death, to the plan and increase their life cover. A few plans also give offer premium payment waiver in case of permanent disability or critical illness.
  • Tax Benefits: The policyholder gets tax exemption on both the premium payments and maturity or final death payouts, under Section 80C and Section 10(10D), respectively.
  • Low Risk: Endowment policies are safer as compared to other investments like mutual funds or ULIPs, as the amount is not invested directly in equity funds or the stock market.

Who should buy Endowment Policies?

As per the experts, individuals having a regular stream of earnings and who require a lump sum after a certain period of time should consider purchasing endowment plans.

Endowment plans offer a disciplined route for building a corpus, which will help the dependents of the insured in case of financial contingencies. Small businesspersons, salaried individuals, and professionals like lawyers and doctors must buy endowments plans to meet their long-term financial goals. Moreover, endowment plans are an ideal option for people who do not mind settling for fewer returns and are risk-averse. Alternatively, endowment policies are for the common mass rather than for people belonging to the super-rich class.

However, individuals who are interested only in life cover and not the saving component must choose a term life insurance policy. A term plan is not only affordable, but also offers higher cover at the lower premium than the endowment policies.

Under what Circumstances should one buy an Endowment Policy? 

Everyone needs some risk-free, guaranteed returns investments as a part of their portfolio. Hence, endowment plans must be bought by the individuals who want to

  • financially protect their family and dependents
  • build a corpus to fulfil their investment objectives for a longer period
  • ensure goal-based savings

However, such regular premium plans must be bought only when the insured is reasonably particular about a steady flow of earnings, which would aid him/her in paying premiums regularly. As these plans have a long-term nature, the longer the term of the policy, the better the total benefit. Hence, people who have an irregular income might take single pay or flexi pay plans, but not the regular payment endowment plans.

Why should an Individual buy an Endowment Policy?

Endowment policies provide a disciplined means of saving money for the future needs. An additional advantage is life risk coverage, which would help the family and other dependents of the policyholder if something troublesome happens. One may find the returns lesser, but they are risk-free in case of certain sum assured. One can also avail tax benefits subject to some conditions.

This is why the risk-averse investors prefer endowment plans. Apart from offering a life cover to the insured in case of an unforeseen event, it also offers the maturity amount to the policyholder if s/he survives the policy term.

Things to Consider before Buying an Endowment Policy: 

There are a few things that one should consider while buying an endowment policy. They are:

  • Begin early planning: Making investments at an early age offers a long horizon to invest. This aids the insured to build a vast corpus over time. This facilitates a disciplined saving and ensures better returns because of its power of compounding.
  • Review the flexibility option: There are various flexible options. If the insured is a salaried individual, s/he may choose a regular payment endowment policy. There are single payment options for individuals with irregular income.
  • Know different types of Endowment Policies: If an individual wants to invest in endowment plans, it is necessary for him/her to make frequent premium payments. A portion of the premium is used to buy a life insurance plan. The remaining sum is invested on either a non-profit basis or profit basis type of plan.
  • Select a plan that offers riders: A lot of insurance companies offer additional benefits like education endowment, double endowment policy, or marriage endowment policy. One must keep such riders in mind while buying one for them. Some insurers also provide additional riders towards surgical assistance or critical illness.

How does an Endowment Policy work?

In case the policyholder dies before the maturity of the plan, the nominated beneficiary gets only the fixed amount termed as Sum Assured. As the insured live longer s/he gets bonuses, and if s/he outlives the term of the policy, s/he gets the maturity amount, i.e. Sum Assured + Bonuses.

What is an Endowment Policy?

Ans:

Endowment policy is a type of Life insurance policy. It covers the life insured for a specific period of time. If the Life insured survives till the end of that specified period (maturity period), he will be paid the lump sum assured along with bonuses (if any) by the Insurance Company. If the Life insured dies within the maturity period the Insurance Company will pay the sum assured to the beneficiary.

How endowment plan is different from Term insurance plan?

Ans:

The main difference between an endowment plan and term insurance plan is as follows- In case of term insurance plans, a lump sum is paid to the beneficiary if the Life insured dies within the maturity period. If the death of the insured does not occur within the maturity period, no sum is payable by the Insurance Company. Whereas in case of endowment plans, if the insurer dies before the maturity date, the nominee will get lump sum assured by the insurance company. But if the life insured survives till the policy maturity period, he will be paid the sump assured along with the accrued bonus (if any).

Can I receive bonus along with the assured sum after the policy matures?

Ans:

Yes, the life insured can get bonus, provided the policy is run for a certain minimum period of time. So it is not guaranteed.

What are guaranteed in endowment plans and what are not?

Ans:

The lump sum of money assured by the Insurer will be given to the Insured if he survives until the policy matures. If the insured dies early, that is before the policy maturity period, his beneficiaries will get the lump sum assured by the insurer. This is the only guaranteed part of the endowment policies that you will get the assured sum on the policy maturity date or before in case of early death of the insured. What is not guaranteed in the policy is the bonus. You will receive bonus or not depends on the number of years the policy was in force.

What are the different types of endowment plans?

Ans:

Endowment plans can be classified into following categories:

  • Unit linked Endowment: In this type of plans, the insurance holder chooses to use their fund for investment.
  • Low cost Endowment: This type of endowment policy helps to accumulate the sum needed to pay after a given period.
  • Full Endowment: Full endowment is the type of policy in which the sum assured is equivalent to the death benefit from the very beginning and the final payout is relatively higher.

What are the features of Endowment plan?

Ans:
Following are a few prominent features endowment plans:
  • Endowment plans are savings oriented
  • A pre-determined amount is paid to the insurance holder on maturity of the policy
  • It has high liquidity
  • It can have limited payment of premiums
  • The returns of the policy can be earned on a compounding basis, that is to say, you can earn the returns during the term of the plan
  • In case of early death, the nominee is entitled to have the sum assured or the accumulation amount, less outstanding premiums, whichever is higher
  • It helps avail tax benefits
  • As the maturity benefits are guaranteed, endowment plans are categorized as low risk plans to invest in.

What are the additional bonuses on endowment policy?

Ans:
Bonus is the money paid additionally with assured sum by the Insurance Company to the life insured. There are mainly two types of additional bonuses on endowment policy :
  • Reversionary bonus: This is the extra money that is paid additionally to the sum assured at the time of early death of maturity of the policy.
  • Terminal bonuses: It is a discretional extra amount of money paid additionally on the maturity of the policy or the early death of the life insured.

What are the rider benefits of endowment policy?

Ans:
A number of rider benefits available with endowment policies are listed as follows:
  • Critical Illness benefit
  • Family income benefit
  • Waiver of premium benefit
  • Hospital cash benefit
  • Accidental death benefit
  • Partial Disability benefit

How to know whether I should buy endowment policy?

Ans:
An endowment plan not only provides all the basic benefits of a life insurance plan but also some additional benefits like ‘double endowment’ , ‘educational endowment’ , ‘marriage endowment’ plans etc.. The policy holder is also allowed to add riders with the basis plan. But endowment plans can be a bit more expensive than any other traditional life insurance plans. Always read and understand the rules and regulations as well as the features and benefits of the policy thoroughly before buying a policy. So depending on your requirements and your financial capability you have to decide whether you should buy an endowment plan or not.

Who needs an endowment plan?

Ans:
Endowment plans give the triple benefit of life coverage, savings and wealth growth. So an endowment plan is appropriate for anyone of any age if he/she is looking for a policy which gives more than just life coverage.

Name a few good Endowment policies.

Ans:
Following are a list of popular endowment policies:
  • LIC New Endowment plan
  • Kotak classic Endowment plan
  • Kotak premier endowment plan
  • Reliance wndowment plan
  • Shriram Life Insurance – New Shri Life

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