Choose an Endowment Plan That Helps You Grow your Savings

An endowment plan is a form of life insurance policy that provides the dual benefits of a life insurance cover and a savings plan as well. With this policy, you have to pay a certain amount of premium regularly over a period of time towards your policy. When the policy matures, you get the sum assured if you survive the entire policy duration. In case of sudden death during the tenure of the policy, your family or the beneficiaries of the benefit will receive the lump sum amount.

Types of endowment plans that help you grow your savings in a disciplined manner:

1. A unit-linked endowment plan is an endowment plan in which the premium amount is used to buy units in various investment funds as selected by the policyholder.

2. A with-profits full endowment plan provides bonuses along with the sum assured, with the bonus being subject to declaration by the company. Accordingly, the sum assured could be higher when received as maturity or death benefit.

3. In a non-profit endowment plan, instead of bonuses, guaranteed additions are provided since the insurance company’s profits are not considered in these plans. The insurer can utilise this amount on maturity, which is higher over the long term.

Few considerations that help you choose the best endowment plan:

• Start planning for an endowment insurance plan when you are young. This is mainly because you can plan your expenses in a disciplined manner and start investing regularly. Based on your income and expenses, you can choose to pay monthly, quarterly or yearly premiums. If you have a steady income flow, you can choose to pay a fixed amount regularly. By developing a disciplined approach towards your savings, you will be able to save more over the year.
• Endowment policies are generally set for a tenure like 10 years, 15 years and so on. By taking up the policy, you are obliged to pay it through the policy tenure. As the plan is secured for the long term, the returns are generally higher. On maturity, you can use this large sum assured to manage your post-retirement expenses, children’s education or any other personal commitments. As you receive a lump sum amount, you can also invest it in safer financial securities instruments and earn better returns.
• If you want to receive the complete benefits of an endowment policy, it is essential to pay your premiums on time. Find out what premium payment options are available. Even with an irregular income, you can choose a single premium endowment plan so you can continue to enjoy the life cover as well as the savings benefits of your plan. Those who have a steady and regular income can opt for a regular premium option to keep their endowment policy going.
• There are various types of endowment plans suitable for different investors and policyholders. For example, a Unit-Linked Endowment Plan would be ideal for an investor who wants to invest in market-linked securities to earn returns on their endowment plan.
• You can avail of tax benefits on your endowment policy under Section 80C and Section 10 (10D) of the Income Tax Act, 1961.
• You can opt for additional riders available with endowment policies. In case you choose a waiver of premium rider, then premium payments towards the policy are waived off in case of accidental death or disability while the plan stays in effect.
• Insurance companies also declare bonuses that can enhance your endowment policy’s sum assured on maturity. However, the announcement of bonuses will depend on the company’s surplus profits.

Having discussed some of the important points in choosing an endowment plan to grow your savings, it is necessary that you also analyse your financial stability and day-to-day expenses. Decide on a long-term financial goal based on your future financial goals.

Make a smart decision by investing early and ensuring your savings grow with the right endowment savings plan.