How Do Endowment Plans Generate Returns?

Endowment plans are one of the most popular forms of insurance available. Insurance plans are a great benefit to secure the financial interests of you and your family. They help you keep your wealth safe for the future. With endowment plans, your money is also invested in market-linked funds which gives them an opportunity to grow. With this type of plan, not only can you safeguard your earnings, but also grow them for the future.

What are the Returns Available with Endowment Plans?

Endowment plans provide returns in the form of lump sums. These are paid out either on the death of the policyholder (death benefit) or on the maturity of the insurance plan (maturity benefit). There is no option to take these benefits out in lump sum. 

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These are long term investment cum insurance options. The policy term can be any time between ten years to twenty-five years. The best returns are generated when the policy is kept in effect for a long time. Not only do you get a protective cover for long, but also great returns that will help you sustain your financial condition, even in the future.

How Do Endowment Plans Generate Returns?

As for all insurance plans, you have to pay a fixed amount for your endowment plan on a regular basis. This is known as the premium amount. It is determined at the beginning of the plan and depends on the age, health conditions, gender and more of the policyholder. The premium paid by the insured gets divided into three components: for the sum assured, the charges levied by the insurance company and for the investment unit.

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This invested money then generates returns annually. It depends on market trends with respect to the type of investment fund. The return generated from these investments is usually provided as non-guaranteed bonuses to policyholders of the plan. This bonus, however, is not paid out annually. It is accumulated under the endowment plan and is only paid out as benefits with death or maturity benefits.

Conclusion

It is always best to know exactly how your insurance plan is working. This will help you get the most benefits out of them. Be aware of how your financial assets are being handled to become a responsible policyholder.

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