Is Endowment Plan an Ideal Investment for Me?

Has recently one of your relatives purchased an endowment plan? Did they recommend buying the same to you as well? If you are considering their recommendation, but a bit hesitant, you have come to the right place! Before you think about buying an endowment policy, it would be better to find out whether or not it is the right kind of investment for you. Also, it would be significant for you to uncover the basic concepts of endowment policies. 

What is an Endowment Policy? 

Endowment plans life insurance policies that offer two major benefits. Firstly, they provide cover for an individual's life in case of an unfortunate event and secondly, they provide maturity benefits at the end of the policy term. The maturity benefits are basically a lump sum amount. It must be noted that the insurance company pays the sum assured amount to the nominees in case of the death of the policyholder or to the policyholder on a fixed date in the future.

When it comes to benefits, endowment policies offer maturity benefit, death benefit as well as tax benefits. One of the key reasons people buy endowment policy is because it provides one with a massive saving at the time of policy maturity. This amount can be easily used in reinvesting in any other element or keeping it intact for life after retirement. It can be said that endowment policies are risk-free and come with a fixed amount on a fixed date. 

Is Endowment Policy the Right Investment Kind for You?

Now that you have a fair idea about endowment policy, let us shed light on why and when it is a good choice for you to make. That said, note that you must buy an endowment policy if: 

• You want to choose a low-risk plan.
• You are looking for a long-term investment.
• You want to gain the dual benefit of investment and insurance.
• You want to receive a lump sum amount to ensure financial security when the time comes.
• You think you could use the lump sum amount for your monthly expenses, your child’s wedding, a much-awaited vacation, or any other area of your life. 

Things to Remember 

Here are a few things you must be aware of before buying an endowment plan:

• Endowment plans with 15 to 20 years of maturity are more beneficial as they help in accumulating a significant amount.
• Endowment plans come with a surrender value, which means that you receive an amount if you decide to discontinue the plan. The same is applicable only after paying the premium for 2 years. 

Aspects to Consider While Buying Endowment Plan 

Here are a few elements to consider before you buy endowment policy:

• Premium rates
• Insurance company’s track record
• Bonus amount offered
• Customer service
• Claim settlement ratio of company
• Financial stability of the company

Final Words

If you want to gain the maximum benefits out of your endowment plan, make sure you choose an easy to understand policy. Considering your specific needs and what your insurance company is providing you will help you make a wise decision. Don’t forget, with a good endowment plan, you will get optimum benefit without much risk. 

Also Read: Endowment Plans Vs. Term Insurance Plans

How Do Endowment Plans Generate Returns?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.