If you are an impulsive buyer and spend a lot of money without any prior planning, an endowment plan is the right plan for you. That is because an endowment plan provides a disciplined route for long-term savings. Buying an endowment plan is beneficial for those individuals who have a regular flow of income and might need a significant amount of money after a certain period of time.
However, there are certain things that should be considered before buying an endowment plan.
1. Salient Features of an Endowment Plan
An endowment plan is a life insurance policy that provides life coverage along with an opportunity to save regularly over a specific period of time so that they can receive a lump-sum amount on the maturity of the policy. Subsequently, one can use this maturity benefit to fulfill their various financial needs like funding their children’s education, saving for retirement, buying a house, children’s marriage etc.
The plan not only provides maturity benefit, but in case of eventuality, the beneficiary of the policy also receives the full sum assured amount. Thus, we can describe endowment plan as an insurance plan that allows you to save and offers a lump-sum maturity benefit.
The major benefit that can be availed under endowment plan includes financial security of the loved ones, tax exemption under section 80C and (10D) of income tax act, goal based savings, in case of any emergency option to avail loan facility against the policy.
2. Who Should Consider Buying an Endowment Policy?
As mentioned above, endowment policy can be a great savings option for those who tend to spend excessively without keeping any financial backup. They may require a significant amount in hand, after a certain period of time in life (especially after retirement) and an endowment plan helps them to follow a disciplined route of saving.
Any individual, who wants to meet their long-term financial needs, can opt for an endowment plan that provides a dual benefit of life coverage along with saving opportunities.
3. What are the Right Circumstances of Purchasing an Endowment Plan?
According to one’s financial needs, every individual requires a risk-free assured investment. Therefore, endowment plans should be bought to cover three areas i.e. first to protect and ensure financial stability to the loved ones, second to achieve the financial goal, third build savings to achieve investment objectives over a long period of time.
However, while you are planning to buy a regular premium plan, you should consider buying it only when you have a steady flow of income to pay the premiums regularly. Endowment plans are beneficial since this is a long term plan and provides better returns over a long period of time.
4. Why Should You Buy an Endowment Plan?
One of the major reasons why one should buy an endowment plan is that it provides an opportunity to save money in a disciplined way to fulfill the future financial needs. Moreover, an advantage to this plan is that the insured person also gets life coverage along with an opportunity to build a corpus for a financially secured future.
An endowment plan may give you lower returns but the investment associated risk is very low in an endowment plan. Under endowment policy, the policyholder can also avail tax benefits on the returns. These features make endowment plan more preferable for risk-averse investors as it also provides maturity benefit apart from death benefit offered to the nominee of the policy in case of an eventuality.
5. What checklist should One Keep in Mind While Buying Endowment Policy?
As you can get a wider option of endowment plans available in the market, choosing an apt policy for yourself depends on numerous factors including individual needs, income, current life stage, risk appetite etc. If you are thinking of investing a huge amount in an endowment plan, never forget to compare the quotes beforehand. By checking the premium rates of various endowment plans, you will be able to pick the right plan for you.
Moreover, you must check the company track records as well. However, most of the endowment plans offer lower return as compared to the ULIP plans but are considered safer in a long run. As return rates play an important part deciding on the saving options, the buyers should know the bonus amount offered by the policy.
The other things that should be check-listed are customer service, claim settlement ratio, financial stability of the insurance company and the track record of the company.
In order to avail the maximum benefits of the plan, one should opt for a simple and easy to understand endowment plan. If you consider all these points while buying an Endowment Plan, you can surely choose the most suitable plan for yourself.
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