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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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.
The key features of a pure endowment plan are listed in the table mentioned below:
|No Maturity Benefit if Policyholder Dies
|The pure endowment policy will only pay out if the policyholder survives the term
|Fixed Policy Term
|If the policyholder survives the term, they receive the lump sum payment as a retirement fund
|No Death Benefit
|If the policyholder dies during the policy term, the policy will not pay out any maturity benefit to their nominees
|No Surrender Value
|The policyholder cannot surrender the policy before the end of the policy term in exchange for its cash value
The benefits of a pure endowment plan are as follows:
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.
Pure endowment policies typically have a long policy term. This allows the policyholder to save for their financial goals over an extended period.
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.
Pure endowment policies require the policyholder to pay premiums regularly throughout the policy term, helping them develop a disciplined savings habit
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.
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.
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
Past 5 Year annualised returns as on 01-03-2024
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
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