What Is Endowment Life Insurance?

Everyone wants to safeguard their loved ones from the ultimate risk of death and thus, many opt for insurance. But life insurance not only offers a risk cover but also gives you a chance at fulfilling your dreams alongside your family. Various types of life insurance plans like endowment policy enable you to save up for the long term while securing a financial backup for uncertain times. Here’s everything you need to know about an endowment life insurance policy.

Endowment Life Insurance Policy

Such an insurance plan offers policyholders a risk cover plus a savings component. In exchange, the insured must pay the set premiums regularly. In the event of an unfortunate incident, the insurance provider shall payout a lump sum death benefit to the beneficiary. This amount can be used to safeguard the finances of your loved ones in your absence.

But what if you survive the policy term? In such a case, you shall get a maturity benefit if you outlive the plan tenure. Thus, you not only get a risk cover but also an opportunity to create wealth with your endowment policy. So, if you plan to achieve a life goal after a certain number of years, then an endowment plan is the kind of life insurance policy you should choose.

Benefits and Feature of Endowment Insurance

Go through some key benefits of opting for endowment insurance over other types of life insurance policies:

  • Dual benefit

Instead of getting a pure risk cover that won’t offer any perks for outliving the policy, you can choose an endowment plan. While ensuring your dependents have a financial backup, you can aim to save up for the long term. Such a dual benefit can go a long way in helping you fulfil your future goals.

  • Helps you save

Paying the insurance premium regularly over a period of time offers you a disciplined method of saving for the long term. Hence, you can reap the benefits of life insurance on surviving the tenure and receiving the lump sum payout.

  • Offers low-risk option

There are numerous investment options available in the market with varying risk exposures. If you are a risk-averse investor who prefers stable income with low-risk instruments, then endowment is a suitable choice. It’s not a market-linked financial tool and provides moderate returns at the end of the policy term.

  • Gives tax perks

While creating wealth and securing a risk cover, you can also invest in a tax-saving instrument at the same time. The premiums paid towards your endowment policy can be claimed under Section 80C of the Income Tax Act. A maximum deduction of INR 1.5 Lakh is allowed per financial year. The death or maturity payout can be claimed as tax-free under Section 10(10D) of the Income Tax Act. Therefore, you get to safeguard your family as well as reduce your tax liability.

  • Flexible payment options

Depending on your income inflow, you can pick from various premium payment frequencies. These include monthly, quarterly, half-yearly and yearly payment options. Many a time when you compare the premium for the same policy with two different payment frequency, you may find one to be more affordable. Hence, you can choose an option that works for you and is cost-effective.

  • Extensive protection

You can combine your endowment policy with rider benefits to avail extensive coverage from risks. These add-on covers are available at low rates and the benefits go beyond the coverage offered by insurance. Thus, you can maximise the protection available under your endowment insurance plan to secure your family from uncertain mishaps.

Who Should Opt for Endowment Policy?

Though endowment policies are meant for every individual, the following kinds of people can surely consider getting the plan:

  1. Individuals who require a lump sum payout after a period of time
  2. Policyholders who are looking for low-risk investment options
  3. Individuals who want to reap the benefits of the dual advantage of risk cover plus savings component
  4. Individuals who want to meet future life goals

With this, you must have understood what life insurance is and how it is beneficial. So, if you are still considering getting a policy, opt for one today! Ensure to compare various plans offered by insurers to get the most suitable policy!

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