While looking to meet your financial goals, you might consider investment plans. But are you tired of the same old investment options? How about a plan that offers more? An endowment policy is the amalgamation of the best from both investment and insurance benefits in a unique way. It safeguards your loved ones and also saves money for you in the long run due to the accumulation of cash values. Read ahead to know how to make it your smartest investment decision.
What is an Endowment Policy?
An endowment policy, also known as an endowment plan, is a life insurance product. It promises a fixed sum or income benefit to the policyholder at the end of the policy term. It serves as a low-risk savings method that helps meet the financial goals related to retirement, homeownership, or education.
As a life cover, the policy not only provides benefits to the policyholder upon maturity but also acts as financial support in circumstances of unfortunate events. The endowment policy requires periodic submission of premium amounts at the policyholder’s convenience. It may offer a death benefit up to ten times the annual premium or as per the sum assured chosen by the policyholder, with the freedom to receive the final amount as a lump sum or as regular income.
How Does an Endowment Policy Meet Financial Goals?
The endowment policy is a popular life cover owing to its significant role in meeting financial goals. The benefits of the endowment policy are:
- Fulfil Your Needs
One of the key benefits of an endowment policy is the expectation of a fixed maturity amount, as stated at the time of taking the plan. The amount is provided at the end of the plan tenure and grows steadily during the period. This means that market fluctuations do not affect traditional endowment policies, allowing you to plan for different purposes. - Life Cover
In case of any unfortunate incident, the death benefit will be provided to your loved ones (who can be the nominee or legal heir) as directed by the policyholder. The applicant or receiver may also get additional amounts or benefits as per the plan specifications. - Maturity Benefit
The endowment policy can also offer additional benefits. However, they vary due to multiple factors such as gender, age, policy term, premium, and premium payment term. Depending on these, the applicant can expect guaranteed additions, accrued reversionary bonuses, and terminal bonuses. It must be noted that these benefits are not guaranteed in every policy, and their availability should be inquired about. - Protection From Tax
After saving for a long time, the least you want is for the amount to be diminished by taxes. Fortunately, an endowment policy offers tax benefits under Section 80C of the Income Tax Act, applicable on paid premiums. The maturity proceeds are also tax-exempt under Section 10(10D), provided the annual premium is less than 10% of the sum assured. Hence, you save at the beginning of the policy, during the deposit stage, and at maturity (subject to conditions). - Ease of Access to Loan
In case there is a financial need before the policy matures, the financial goals can still be met by an endowment policy. It offers the option of a loan after the policy acquires surrender value. The loan amount will be based on the policy’s surrender value, with some policies offering a loan amount of up to 80% of the surrender value.
Conclusion
An endowment policy is a low-risk investment that promises a fixed sum after the plan tenure ends. Providing financial assistance, the policy is a life cover that also aids in any unfortunate situation that may occur. Further, the tax, maturity, and loan benefits also assist in meeting different types of life goals in a timely manner. Go through the policy specifications to know about the applicable features.
