6 Things You Must Know About Endowment Plans
- Reduce taxable income by up to Rs. 1,50,000 deduction under section 80C**
- Convenient payment options - annual, half-yearly, quarterly or monthly premium payments
- Do more with plans that offer pure protection, retirement planning and investment options
An endowment plan is a type of insurance plan which not only provides you with a cover but also allows you to invest a part of the premium in bonds, stocks, etc., so you can get a modest amount upon maturity. Hence, this type of plan is brilliant for you due to its dual nature of providing both cover and maximising your savings, and is recommended if you have long-term goals to fulfill. Some of the key benefits that you may enjoy on availing this type of plan are that you get to enjoy tax benefits under the Income Tax Act, 1961 as well as take a loan in case of any monetary requirement. However, you must know various other things about this type of plan before purchasing one for yourself.
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Types of endowment policies
There are basically two kinds of endowment policies. One is with profit endowment plan and the other is without profit endowment plan. The one with profit policies is a participating plan which ensures that along with the cover amount, you also get to enjoy other benefits that you may have accumulated over a period of time. Under the ‘without profit’ policy, you only get a maturity benefit in case you survive the term. This type of plan is non-participating in nature.
- Bonuses
Various endowment plans allow the insured to enjoy certain bonuses based completely on the performance of their investments. These bonuses are added to the sum assured and paid to the insured when the policy attains maturity. There are two types of bonuses – terminal bonus and reversionary bonus. A terminal bonus is paid only at the time of policy maturity. Reversionary bonuses are recurring bonuses added to the sum assured regularly based on the insurer's performance.
- Rider plans
You can add a rider plan to your existing policy by paying extra premiums. These add-on plans are extremely helpful for your loved ones from a financial point of view. Some of the rider plans are critical illness rider, accidental death benefit, family income benefit, waiver of premium benefit, etc.
- Beneficial if you purchase it for a long term
This life insurance plan is beneficial for you if you purchase it for a long period of time. The returns may increase over a period of time and since the surrender value is low, it makes more sense to continue with this type of plan for a longer duration of time.
When to buy an endowment plan?
This type of plan is recommended for you if you have long-term goals which you want to fulfill. For example, if you want to build a corpus that will help you in taking care of your children’s education and marriage, or allow you to buy a home in future, then it is highly recommended that you purchase an endowment policy. The dual nature of this plan helps in fulfilling the future dreams of your loved ones even if you are not around in future.
List of some of the endowment plans you may purchase
- LIC New Endowment Plan
- Kotak Classic Endowment Plan
- Reliance Super Endowment Plan
- SBI Life- Smart Bachat
- BSLI Dream Endowment Plan
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