What Should You Know About Endowment Policies?
The function of a life insurance policy is to provide life cover to the policyholder and their family. But some types of life insurance policies also look after your financial needs through a money-saving plan. Such plans save a part of your premium payments in the form of safe investments. When it comes to choosing a suitable plan, there are numerous options to choose from, thanks to a large number of life insurance providers in India.
An endowment life insurance policy is one such plan that enables a long-term savings plan with life cover under a single policy. And so, such a useful life insurance product should be explored well before purchase.
What does an endowment policy do?
Under an endowment plan, one part of the premium payment goes towards the life insurance cover. The other portion, which is the savings component becomes a part of low-risk investments which help grow your savings. Additionally, there is also a bonus that is paid out on maturity or on death that helps amplify these savings.
When it comes to low-risk investments, most investors choose endowment plans over other forms of investment due to the dual benefits of the plan. Not only does this eliminate the hassle of separately setting aside capital for another investment but also ensures that about 10 years down the line, you will have a reliable savings fund that will help you meet your financial goals.
Why should you have an endowment policy?
As the sole or primary earning member of a family, it is your responsibility to provide for the family. For this, you may have a life insurance plan that will either offer a maturity benefit or a death benefit. However, all insurance plans do not offer the benefit of saving money while financially protecting you and your family.
The aim of having an endowment policy is to ensure maximum savings during the policy tenure while being safely covered by the insurance plan. Endowment plans offer guaranteed returns and are, therefore, low-risk savings plans, mainly preferred by risk-averse investors.
An endowment policy can be an ideal choice among the many saving schemes available in India as it offers guaranteed returns at the end of the policy.
How to choose an effective endowment plan?
Here are a few things that should be taken into consideration while choosing an endowment plan:
- A steady source of income: It is important to regularly pay your premiums in an endowment plan to ensure a disciplined and undisrupted saving routine. Therefore, having a reliable and steady source of income is necessary.
- Examine the premium rates: The premium rates of endowment policies tend to be a little higher than other life insurance plans. Be sure to choose one that fits your budget so that you do not have to pay more than you can afford.
- Bonus amount payment: Before you buy an endowment plan, consult your insurance provider about the bonus rate on the sum assured. You can select a plan as per your preference of the bonus rate as well.
When you know the importance of savings, you also understand that taking a disciplined approach to saving your money is equally necessary. By paying the premiums regularly towards an endowment policy, you ensure that your savings are uniformly invested and accumulated, which makes it easier to receive high returns along with the bonus, either as a maturity benefit or a death benefit.