The endowment policy is a type of life insurance policy. Other than providing you with life coverage it also allows you to save money regularly. The money that you save is provided to you in a lump sum when the policy matures.
An endowment plan offers little to no risk. Safety of returns is the USP of endowment policies. Since the returns are assured, you can plan and look to achieve important long-term goals with them. It also makes you a disciplined saver and investor.
Investing in an endowment policy also entitles you to receive a tax deduction. As per section 80C of the Income Tax Act 1961, you can avail of tax deductions up to Rs 1.5 lakh on the premiums paid. Apart from this, the maturity benefit can also be tax-free under section 10(10)D of the Income Tax Act.
Another benefit of the endowment policy is it gives you the ability to withdraw loans against the policy. This helps at the time of a financial emergency and saves you from debt. Other features such as premium protection and limited period payment also add value to this plan.
Eligibility Conditions of Endowment Plan
Before you decide whether you need an endowment policy or not, here are the eligibility criteria:
1. The minimum age is 0 for a basic endowment planThis means that you can buy an endowment policy for your child as soon as he/she is born. Some plans have a minimum age of 18 years as well.
2. The maximum age till which you can enter an endowment policy is 60 yearsThus you can park your retirement funds in an endowment policy for preservation over a long period or legacy goals.
3. The minimum age of maturity is 18 yearsSo, if your parents had bought an endowment plan for you when you were a minor, it’s a perfect way to fund your higher education.
So, almost anyone with a sound mind or a guardian can buy an endowment policy. Now, let us look at its features and benefits to figure out when you will need it.
When is an Endowment Plan the Best Solution?
There are some scenarios under which an endowment plan can offer you the best solution. Here are the scenarios
1. Fills the Gap in your Retirement Corpus
Endowment policy can prove to be a great addition to your existing retirement corpus. Suppose you have estimated a sum that you think would make up a good corpus post-retirement. But as you do work you realize that you are well short of the target you set. To fill this gap endowment plan comes to play.
Endowment plans offer you a lump sum amount on maturity. This amount is guaranteed to you provided you pay your premiums regularly. You don’t have to worry about returns as your investment remains safe in the endowment plan.
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2. Protecting your Child’s Higher Education Goal
Taking care of your child’s education is one of the biggest goals to achieve. You would not want to leave anything to chance when it comes to your child. With the help of an endowment plan, you can ensure that your child completes his higher education even if you are not there for him.
Many policies such as Canara HSBC Life Insurance Guaranteed Savings Plan has a feature called the premium protection plan. This feature enhances your family’s protection.
If while buying the policy you choose the premium protection option, the following will happen after your death within the course of the plan:
a) The sum assured is provided to the family immediately after the death
b) The life insurer will pay the remaining premiums and your family will get the maturity benefit as per the normal maturity
3. Safeguard your Dependent’s Future
An endowment plan builds up your habit of saving. You keep saving an amount for some time. This amount can be used to meet the future needs of your dependents.
For example, you have to secure funds for your daughter’s marriage. You set up an endowment plan and invest in it for a period, say 10 years. When the policy matures you will get the guaranteed maturity benefit that too with additional bonuses applicable as per the terms of your policy.
An endowment plan can also help in the achievement of other major goals of yours as well as others dependent on you. Let’s take a scenario. You are now married and have children, the next goal you want to achieve is to buy a house 15-20 years from now to enjoy your retirement. With an endowment policy, you can invest small amounts which will give you a large corpus after 20 years. Use this amount to buy a house without putting much pressure on your finances.
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4. Leave a Legacy for Grandchildren
You not only want to help your children achieve their goals, but also your grandchildren. There goes a saying that grandchildren are the greatest blessing you will ever get. Surely you would love to leave a legacy behind for them.
An endowment plan lets you do that. By taking this policy you ensure a good future for the next generation. Endowment plans help you grow wealth over time which becomes handy for the future.
5. Preserve your Hard Earned Wealth
What if you have taken a huge risk in an investment and it, fortunately, paid off. Now you have a corpus with you. Now you don’t want to take any risk and preserve the wealth that you have created. The endowment policy is the safest instrument you could use at this time.
The wealth that is accumulated in an endowment plan is not affected by the market. It is generally free from market volatility.
Thus, your wealth is created and the principal does not deplete. You will get the predicted maturity benefit. In addition to this, you are also eligible for wealth boosters and loyalty additions which increase your fund’s value.
If you can associate with any of these scenarios or have a similar financial goal, you should consider investing in an endowment plan. To summarise here’s when your wealth goal requires an investment like endowment plan:
- The goal is important for your family’s future
- The goal requires a definite minimum financial support in any case
- You want to invest money earned through hardship or from a high-risk investment
An endowment plan helps you ensure that your family stays protected financially even when you are not there. At the same time, it reduces your stress as you know your family will be taken care of.
Canara HSBC Life Insurance Guaranteed Savings Plan poses as a robust endowment plan. It provides guaranteed maturity benefits, provides cover for the entire term with a limited period payment.
More than anything, endowment plans like Guaranteed Savings Plan stand to benefit long-term investors more. The plan adds more bonuses with time, which help the growth of your portfolio.