Pure Endowment Plan

A pure endowment plan is a type of insurance policy that provides a lump-sum payout to the policyholder at the end of the policy term. It is a low-risk investment option that can help individuals achieve their financial goals, such as saving for retirement or a child's education. Let us learn in detail about this type of endowment plan in this article.

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6.5%**

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(5-10 Years)

7.1%***

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(other popular options)

(15 Years)

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We are rated~
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58.9 Million
Registered Consumer
51
Insurance Partners
26.4 Million
Policies Sold

What is a Pure Endowment Plan?

A pure endowment policy meaning is easy to understand. It a type of insurance policy that pays out a lump sum amount at the end of a specified term. 

The payout is guaranteed under this savings investment plan, provided that, the policyholder survives till the end of the policy term. The policyholder pays premiums to the insurer, and at the end of the term, receives a lump sum payout, which is beneficial to fund their financial goals. 

This makes a pure endowment policy one of the most preferred pension plans and best investment options in India.

Features of a Pure Endowment Plan

The key features of a pure endowment plan are listed in the table mentioned below:

Features Details
Guaranteed Payout
  • A pure endowment plan provides a guaranteed lump sum payout at the end of the policy term
  • Only if the policyholder survives the term
No Maturity Benefit if Policyholder Dies The pure endowment policy will only pay out if the policyholder survives the term
Fixed Policy Term
  • The policy term for pure endowment plans is fixed
  • Policyholder cannot withdraw from the plan before the end of the term
Premium Payment
  • Policyholder needs to pay premiums regularly throughout the policy term
  • To keep the policy in force
Maturity Benefits If the policyholder survives the term, they receive the lump sum payment as a retirement fund
Nomination Facility
  • Available
  • If the policyholder dies during the policy term, the nominee receives the sum assured
No Death Benefit If the policyholder dies during the policy term, the policy will not pay out any maturity benefit to their nominees
Tax Benefits
  • Tax benefits u/ Section 80C of the Income Tax Act, 1961
  • For the premiums paid towards a pure endowment plan
No Surrender Value The policyholder cannot surrender the policy before the end of the policy term in exchange for its cash value

Benefits of a Pure Endowment Policy

The benefits of a pure endowment plan are as follows:

  1. Guaranteed Payout:

    A pure endowment plan provides the policyholder with the assurance that they will receive a lump sum amount at the end of the term. These funds can be used to achieve their financial goals.

  2. Long-Term Savings:

    Pure endowment policies typically have a long policy term. This allows the policyholder to save for their financial goals over an extended period.

  3. Tax Benefits:

    Policyholders can claim tax benefits under Section 80C of the Income Tax Act for the premiums paid towards a pure endowment policy. This can help them save on taxes and increase their savings.

  4. Disciplined Saving:

    Pure endowment policies require the policyholder to pay premiums regularly throughout the policy term, helping them develop a disciplined savings habit

  5. No Market Risk:

    Unlike other investment options, pure endowment policies are not affected by market fluctuations or other uncertainties. The policyholder receives a guaranteed payout at the end of the policy term, regardless of market conditions.

  6. No Surrender Value:

    Pure endowment policies do not offer any surrender value. This ensures that the policyholder does not prematurely withdraw from the policy and continues to contribute towards their financial targets.

Disadvantages of a Pure Endowment Policy

Here are some disadvantages of a pure endowment plan you should consider before buying:

  • No maturity benefit if policyholder dies

  • The policyholder cannot withdraw/ terminate the policy before the end of the policy term

  • Lower returns than other investment options such as mutual funds or stocks

  • Pure endowment policies do not offer any surrender value

FAQ's

  • What is a pure endowment policy?

    A pure endowment plan is a savings plan where the policyholder pays a premium over a fixed period, and if they survive the term, they receive a guaranteed payout at the end of the policy term.
  • What is an example of a pure endowment?

    An example of a pure endowment can be a savings account that requires the account holder to leave the funds untouched for a specific period, say 10 years. At the end of those 10 years, the account holder will receive a lump sum of money that has accrued interest over that time. If the account holder withdraws the money before the end of the 10-year term, they may lose some or all of the interest that has accrued.
  • What are pure term plans and pure endowment plans?

    A Pure term plan and a pure endowment plan are both types of life insurance plans, but they have different features and objectives.
    • Pure Term Plan: A type of life insurance plan that provides financial protection to the policyholder's family in case of the policyholder's premature death. If the policyholder survives the term of the policy, there is no payout.
    • Pure Endowment Plan: The policyholder pays a premium to the insurer for a specified period, and if the policyholder survives the term of the policy, the insurer pays the maturity amount to the policyholder. They are a savings tool that offers a guaranteed payout at the end of the policy term.
  • Is the money back plan a pure endowment plan?

    No, a money back plan is not a pure endowment plan. A money back plan is a type of life insurance plan that combines elements of both insurance and savings. In this plan, the policyholder pays regular premiums for a specified period, and at the end of certain intervals during the policy term, the policyholder receives a percentage of the sum assured as a "money-back" payout.
* Applicable for Titanium variant of Max Life Smart Fixed-return Digital (Premium payment of 5 years, Policy term of 10 years) and a healthy male of 18 years old paying Rs. 30,000/- monthly (exclusive of all applicable taxes)
** Fixed deposit rate applicable for 5 year's 1 day to 10 years for investment amount less< 2 Crore ( Not for senior citizens).
*** PPF interest rate applicable for 15 years for investment amount upto 1.5 Lac
+ Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
#Discount offered by insurance company
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

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