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Things to know about endowment policy

Things to know about endowment policy

If you are looking for a dual benefit policy that offers not only life insurance but also helps you grow your savings, an endowment plan is the one for you. You can save on a regular basis over a time period chosen by you and if you survive policy maturity, you receive the entire corpus t as a lump sum.

In event of the death of the insured, the nominee receives the sum assured along with a bonus if any. An endowment policy is a good option to help you meet financial goals such as the education of your children or their marriage, purchasing a house or even planning your retirement.

Types of endowment plans

  • Unit linked endowment plan: In this type of unit linked policy, the life insurance premium is used to purchase units in different investment funds as per your preference.
  • Full endowment plan: The policyholder receives the sum assured as promised at the time of policy purchase. However, depending on whether or not the company declares a bonus, the final payout including the surplus amount may be higher upon policy maturity or death of the insured.
  • Low cost endowment: The insured is allowed to accumulate funds which are usually to be paid after a determined period or mortgage.
  • Non profit endowment: Such endowment plans offer guaranteed additions instead of bonuses since they do not participate in the profits of the life insurance company. This helps generate returns for the policyholder and also make them attractive as compared to other plans in the market.

Features and benefits

  • Higher return on investment: An endowment plan provides financial security by helping you create wealth in the long term to meet the financial goals of your family. The benefits payable to the insured upon survival and the nominees upon death are higher as compared to a pure life insurance policy.
  • Premium payment: The insured has the choice to pay the life insurance premium on a monthly, quarterly, half-yearly or annual basis. The frequency of premium payment is decided as per your preference.
  • Flexibility to choose cover: You can choose from additional coverage to protect you against critical illness, partial or permanent disability due to an accident and accidental death among others. Some plans also waive premium in the event of the insured suffering from either of these conditions.
  • Benefits on both survival and death: Not only does the insured get the sum assured upon survival of policy period, his or her nominee also receives sum assured along with the declared bonus if any in the event of the death of the policyholder.
  • Tax exemption: Tax on the premium paid can be saved as per provisions of Section 80C, while the maturity amount including final payout are also eligible for deduction as per Section 10(10D) of Income tax.
  • Risk factor: As compared to mutual funds, where the money is directly invested in stock markets and hence carries higher risk, traditional endowment plans help you grow your money with little or no risk.

Things to keep in mind before buying an endowment plan

Plan early: The earlier you invest, the longer is your investment horizon and the higher are the returns that you reap over the long term. It also helps build the discipline of saving regularly over time to build a corpus for important milestones in life

Choose riders as per your needs: Riders are offered as inbuilt coverage by most insurers and you must use them to the fullest. Some companies might also offer a double endowment policy or education or marriage endowment plans.

Flexibility of premium payment: You can choose to pay a single one-time life insurance premium or limited premiums if your income is irregular whereas salaried professionals can go for a regular endowment policy.

Returns offered: Many endowment policies offer both guaranteed and non-guaranteed returns. Guaranteed returns are declared upfront while purchasing the policy and are assured on policy maturity or death of insured. Non-guaranteed returns such as bonuses are variable in nature and are at the sole discretion of the insurance company.

Instead of opting for a traditional endowment policy, you can purchase iSelect Star term insurance plan from Canara HSBC Oriental Bank of Commerce Life insurance. Enjoy the return of premium benefit upon survival of policy period while staying protected for life or limited period of time as per your choice.

Inbuilt coverage for accidental death, disability as well as child benefit among others offers additional protection. So secure the financial future of your family by purchasing life insurance that suits your needs and helps your family achieve their financial goals and fulfill their dreams.

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