An endowment policy is a variant of a life insurance policy that offers coverage to the policyholder in case of any eventuality. It is also one of the best investment plans to build a corpus over a period of time that is paid in lump sum by the insurer on surviving the policy term. You can also invest in an endowment plan to avail the maturity amount and use it to fund your future financial needs such as property, children's education, children's marriage, and your retirement.
Endowment plans are life insurance policies that ensure guaranteed sum assured to the policyholder along with other benefits upon the maturity of the policy term. Death benefit is also provided to the nominee/beneficiary/dependants benefits in case of the demise of the insured person or the policyholder. Simply put, an endowment policy is like an insurance instrument offering additional saving/investment advantage to the policyholder.
Basically, an endowment plan offers two major benefits:
There are two clauses in endowment plans i.e. with profit and without profit.
An endowment policy with profits implies benefits to the nominees and terminal bonuses that in addition to the sum insured amount sum assured upon maturity of the policy and therefore, offer additional benefits.
Whereas, a non-profit endowment policy does not offer such benefits and is more like a traditional life insurance policy.
The main feature of an endowment policy is lump-sum payouts of the sum assured. The insured person receives the sum insured amount in lumpsum at the end of the policy term and has the option to invest these funds to meet the future financial goals or financial requirements. One can purchase endowment plans as per their requirement as there are no rigid rules on the selection of policy term.
If you think you spend relentlessly and find it difficult to save for your future needs, then an endowment policy would make one of the best investment plans. People with a steady source of income who want to save a lump sum amount after a certain point of time can consider buying an endowment policy. It is a disciplined investment tool that helps you build emergency funds for future financial emergencies.
Businessmen, salaried people, other professionals like lawyers, doctors can also consider endowment policies to ensure long-term financial security.
For risk aversed individuals also endowment policies make one of the best investment plans. And if you are only interested in the insurance quotient and not the saving part, then you can stick to a term insurance plan.
You can invest in an endowment policy as it makes sense to invest in some investment plans that offer assured returns. You can buy an endowment policy if you want to protect your loved ones against financial turmoil after your untimely demise or to build a corpus to meet long-term goals without any financial crunch. It is ideal for goal-based savings, and to fulfill your investment objectives over a period of time.
However, make sure that you have a steady source of income to be able to pay the premium. And the goal should be long-term to be able to benefit from the investment. And if you do not have a regular source of income then you can also go for single pay endowment plans or Flexi pay endowment policy.
When it comes to investing the earlier you start the better it is. You get better returns if you have a long investment horizon. It helps in bringing financial discipline and also build a corpus in the stipulated time frame. Here are some of the factors that you need to consider:
In a Nutshell
So, if you are looking to bring the investment discipline then you can invest in Endowment plans to save for your future financial needs. Moreover, it provides life risk cover and compensates the dependant members in case something untoward happens to the insured breadwinner of the family. Sometimes the returns might be lower, but the sum assured is guaranteed on the maturity of the policy term. The policy also provides tax benefits, but that is subjected to certain terms and conditions.