What is an Endowment Plan?
Life insurance plans have many forms and one such form is the endowment plans which is a combination of both insurance cover and savings for future goals. So in an endowment plan, you can pay premiums for a fixed sum assured which ultimately gives rise to the death benefit but along with that, you can also invest in the policy aiming to save a little extra cash which is returned to the insured if he/she survives the term of the insurance policy.
Endowment plans are like having a backup plan in case you outlive the policy. The plan is also attractive because unlike regular life insurance plans it doesn’t dissolve the plan if the insured survives the term.
The savings made through the endowment plan is given to the insured as a bonus amount after the policy matures but if the insured dies within the duration of the policy term then the beneficiary receives the death benefit as well as the bonus money.
To summaries, we can say that endowment plans are much like regular life insurance plans offering monetary aid to the family but with an added benefit of savings in the form of small investments which are made through the policy. Also, the tenure of an endowment plan is usually of 10-20 years which is decided by the insured.
Types of an Endowment Plan
1. Unit-linked Endowment Plan-
This type of plan is usually marketed as an insurance cum investment plan. The plan is modelled as to separate the premium into life coverage and market funds under various sectors. This investment is made under the choice of fund the policyholder wishes to invest in.
The decision is based on the risk involved with the investment. This type of insurance plan is generally recommended for those who can digest high-risk investment.
2. With Profit Endowment Plan –
This is a type of insurance plan which offers the death benefit equal to the sum assured amount with a full guarantee. The plan aims to provide the death benefit to the beneficiary of the policy without any reduction in the value but with an added bonus due to the investment factor attached to the policy.
3. Low-rate Endowment Plan –
This is an insurance plan specially made for those who are worried about loans, debts and mortgages. This type of financial burden can be further magnified if the sole breadwinner of the family meets an unfortunate end.
So if you are looking for a plan that can help your family financially after you are gone, then low-rate endowment plan is your answer. This plan offers a particular sum of money to the insured’s family upon their demise. Although the amount is lower in value it seems fair for the cost of the premium for the policy.
4.No Profit Endowment Plan –
This type of endowment plan is what you can call a regular life insurance plan because it doesn’t include any savings option as such. As the name suggests, the plan simply provides a maturity bonus which you can see as a death benefit to either the insured if he/she survives the term or to the beneficiary of the policy if the insured dies.
Also Read –Life Insurance
Benefits of Endowment Plan
1.Bonus Money –
Bonus money is defined as an additional or extra money paid by the insurer to the insured/beneficiary upon the maturity of the insurance policy. The bonus money is dependent solely on the insurer and is given after calculating several other factors.
There are two kinds of bonus such as, a revisionary bonus on with profit plan which is irreversible bonus money added to the death benefit or maturity amount, and a terminal bonus.
2. Add-On –
Along with the maturity money and the bonus paid after the term of the endowment plan, there can be several other benefits which can come up with an endowment plan. These benefits are attached to the policy as a rider at some extra cost on the premium amount. Some of the Add-Ons are :
i. Accidental Death Benefit – This Add-On provides extra cash to the beneficiary of the insurance policy if the insured has died in an accident. The accidental death benefit is paid in addition to the actual death benefit.
ii.Terminal Illness cover – This benefits the insured if he/she suffers from a terminal illness during the validity of the insurance plan. It gives the insured a certain amount of money to help with the medical expenses during the crisis.
iii. No Premium – This Add-On serves a unique feature of eliminating the premium cost from the policy if the insured is suffering from a terminal illness or is permanently disabled due to a medical condition due to which he/she fails to pay the premium.
Best Endowment Plans in 2020 :
1. LIC Endowment Plan –
LIC is a leading insurance company in India and has acquired a wide customer base. The endowment plan by LIC following features :
Age limit: 8 – 55 years
Maturity age: till 75 years
Policy term: 12 – 35 years
Sum assured: Rs. 1 lakh – No limit
2. Kotak Classic Endowment Plan –
Kotak’s endowment plan aims at providing a safe and stable path to the customers for both saving and protection against life’s ups and downs. The features of the policy are :
Age limit: for regular pay – 0 – 55 years
For limited pay – 0 – 60 years
Maturity age: 18 – 75 years
Policy term: 15 – 30 years
Sum assured: based on policy term and age
3.HDFC Life Sampoorn Samridhi Plus –
HDFC is a big name when it comes to life insurance companies in the industry. And like many other insurance providers, HDFC has been offering savings plan such as Sampoorn Samridhi for the betterment of the customers. It’s features are :
Age limit: 1 month – 60 years
Maturity age: 18 – 75 years
Policy term: 15 – 40 years
Sum assured: Rs. 65,463 – No limit
3. PNB Met Life Endowment Savings Plan Plus –
This Endowment Plan by PNB is one of the highly successful savings plans. It is unique in its features and offers multiple savings and investment through a single endowment plan. Some of its features are :
Age limit: for savings – 8 – 55 years ( regular premium payment mode )
for savings plus – 18 – 60 years ( regular premium payment mode )
Maturity age: for saving – 80 years
for savings plus – 65 years
Policy term: for regular pay – 10 – 15 years
for limited pay – 10 – 25 years
Sum assured – Rs. 2,20,000 – No limit