5 Points To Keep In Mind When Purchasing An Endowment Plan

• 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

Investing in the right insurance policy is one of the most important steps towards ensuring future financial security. The market is full of a variety of investment options, with each option catering to a specific financial goal. Most investors look for plans which not only offer insurance coverage but also modest returns on investments. One such plan, which is quite popular among buyers, is the endowment insurance plan.

What is an endowment policy?

Endowment plans are a type of life insurance which offers the joint benefit of insurance and investment. Under an endowment policy, the nominee is entitled to receive a sum assured death benefit if the insured passes away before the end of the policy term. The death benefit can be utilized by the dependents to take care of their needs and requirements in the future, especially when the policyholder is no longer around to provide for them. Endowment plans also include a maturity benefit component wherein a lump sum benefit amount is paid to the policyholder on surviving the policy term. If you are looking to invest in an endowment plan, here are some important aspects to consider.

• Find out about different types of endowment plans

Before you invest in an endowment plan, familiarize yourself with the different types of endowment plans available in the market. You have unit-linked endowment plans, low-cost endowment plans, full endowment plans, with-profit endowment plans, and non-profit endowment plans.

• Invest early on

This is a golden rule when it comes to any form of investing. One must ideally start investing early, so as to be able to build a larger corpus of funds over the years. When you invest in an endowment plan early, not only do you build a habit of saving, but also get the benefit of lower premiums on the insurance cover.

• Check for flexibility options before buying

Endowment plans usually offer a number of options to buyers, especially in terms of premium payment. For instance, salaried individuals can choose a regular premium plan. Other options available include single premium endowment plans. Choose a plan which is in line with your income flow.

• Don’t ignore the riders

When choosing an endowment plan, remember to choose an insurer which gives you rider options to attach to your plan. This will help you enhance the plan coverage in the future. Some of the commonly available riders with endowment plans include critical illnesses rider. Riders will be available at an additional premium that is over and above the base plan premium.

• Check for other factors

When buying insurance, there are certain factors which all buyers must follow, no matter what type of plan they are buying. Make sure the plan is easy to understand. Review your requirements and financial goals before deciding on a particular endowment plan. Goes without saying that you must do your background check on the insurer, their claim settlement ratio, customer service quality, bonus rates, premiums, etc.

This is not an exhaustive list, but just some of the basic points which one must keep in mind when purchasing an endowment plan. Endowment plans make for an ideal option for those looking to achieve not only financial protection but also returns on investment to grow your capital over time.