How do endowment plans help in achieving your financial plan?

Why does one think of wealth creation or financial planning? The ultimate aim is to prepare a monetary haven to enjoy a stress-free retirement phase and fulfill other needs, requirements, and aspirations. 

Yes, you cannot plan for your retirement overnight; however, for sustainable wealth building, it is critical to invest long-term early in your career to ensure a happy and stress-free retirement to have enough corpus to live through your life. 

Need of Life Insurance

Do you believe that having a single source of a steady income in today’s time will suffice your desires and requirements? 

Therefore, it has become crucial to acquire an insurance policy to secure your future financial stability and security and the financial sustainability of your family. 

An insurance plan assists you in achieving your retirement goals and provides you with financial protection from a variety of tragedies. As a result, insurance policies come in handy as a valuable asset to incorporate in your financial planning. Endowment plans are one prominent form of insurance plan that offers protection and recovers all premiums paid and the whole corpus towards the end of the policy period.

What is an Endowment Life Insurance Policy?

The endowment policy is a form of life insurance plan that offers insurance coverage to the insured’s family and functions as savings plan to generate a stable income for the family in the long run. 

As a financially rewarding investment option, Endowment insurance offers a guaranteed sum insured amount to the policyholder plan, which helps build wealth in the long run, allowing one to achieve life’s financial goals. Furthermore, the plan provides a death benefit to the policy’s beneficiary in the event of the untimely death of the life guaranteed within the policy’s term.

How do Endowment Plans work?

An endowment policy’s key characteristic is that it functions as a savings plan for an individual and provides a lump-sum payout coupled with a guaranteed bonus as a maturity benefit to the policyholder when the policy term is completed. The ultimate payoff as maturity benefit granted is substantially bigger based on the bonuses declared by the insurance firm from time to time.

Why Do You Need An Endowment Plan?

When you have an endowment or savings plan, it is simple to secure the future of your loved ones. The yearly premium on a savings plan serves two purposes: 

One portion of the premium is utilized to develop a savings fund for future life objectives. The remainder is allocated to life insurance. If the life insured dies while the term plan is active, the nominee receives the payoff in the form of the sum assured. It can assist the family in maintaining their level of life and meeting their daily necessities. 

Furthermore, if the life insured survives the policy period, the whole sum promised is paid, along with any collected bonuses, at maturity.

Apart from this basic ideology on why you need an endowment plan, here are some more reasons as to why endowment plans are great plans to have in your financial plans:

Tax Benefits: In terms of tax incentives, you can take advantage of 2 provisions under the Income Tax Act of 1961:

  • Section 80C: Section 80C allows you to obtain a return for the premiums you paid to secure the benefits of an endowment savings plan. The life insured can claim a total refund of up to Rs. 1,50,000 for the respective year.
  • Section 10 (10D): The death benefit/sum guaranteed received under the endowment insurance plan is excluded from tax deductions under section 10 (10D). The maturity benefit that the life insured receives towards the end of the endowment plan is also tax-free.

Loan Facility: Having an endowment plan makes it easier to get loans. That being said, you can borrow against your endowment insurance plan and make partial cash withdrawals in an emergency, providing the lock-in period is 3 to 5 years, depending on the endowment plan. Moreover, if you have an endowment plan, you need not put any security against the loan. 

Flexibility to pay premiums: There is also an option of paying premiums in one lump sum or regular installments. Here, if you halt paying your premiums, the endowment savings plan adjusts the overall amount of your sum assured/maturity benefit to the total premium paid. The institution will notify the insurer in case of such an instance where the sum assured is adjusted.

Option to add riders: No insurance plan is perfect for everyone. Thus, financial institutions provide insurance riders like add-ons to your current package. It helps in making life insurance plans more personalized to the individual. Though riders come at an additional yet pocket-friendly cost, this makes your plan have more comprehensive protection moving forward in life. 

Induces Disciplined Savings: One psychological advantage of having such plans is that it gives you the discipline where a chunk of your income is getting invested automatically. As the premiums can be paid at a monthly level as well, thus it makes it easier for anyone to save and let their financial plans stay on track.

What Are Some Best Endowment Plans In India?

Almost every financial institution in India provides endowment plans to its customers. However, we have figured out the list of top 5 endowment plans in India that will prove to be a great tool for your financial plan.

Here are the top 5 endowment plans in India:

  1. ABSLI Vision Endowment Plus Plan
  2. LIC New Endowment Plan
  3. Reliance Endowment Plan
  4. ABSLI Assured Savings Plan
  5. Bharti AXA Life Elite Advantage Plan

ABSLI Vision Endowment Plus Plan: The best plan out there in the Indian market, ABSLI Vision Endowment Plus Plan offers secure savings and complete financial security for a more extended period. Here, the minimum sum assured is Rs. 1 Lakh. It offers both death and maturity benefits to its policyholders. There is a built-in Accidental Death Benefit rider that provides additional Guaranteed Amounts in the event of accidental death. 

LIC New Endowment Plan: The LIC’s endowment plan provides a minimum guaranteed sum of Rs.1 Lakh and death benefits equal to 105% of the gross premiums collected. This policy’s death benefit is greater than the regular Amount Guaranteed or 10 times the yearly premium. This endowment plan can include accidental death and injury riders at an additional expense.

Reliance Endowment Plan: Reliance Endowment Plan is a simple Endowment Plan with a minimum sum assured of Rs 25 Thousand. It is a non-unit-linked insurance plan with a bonus facility that provides a death benefit equal to ten times the annualized premium. The policy term spans from 10 to 25 years. Along with all these benefits, a loan against the policy is available.

ABSLI Assured Savings Plan: ABSLI Assured Savings Plan is a Non-Linked Non-Participating Individual Life Insurance Savings Plan that has guaranteed benefits upon death or maturity of the policy. Additionally, this plan provides joint life insurance, making it a popular choice. In addition to this, it comes with 5 riders, such as one for ‘accidental death benefit’, one for ‘critical illness’, one for ‘hospital care,’ etc. It makes it a comprehensive deal.

Bharti AXA Life Elite Advantage Plan: Bharti AXA Life’s Elite Advantage is a non-linked, non-participating individual life insurance savings plan that gives you the benefit of saving while also providing your family with a protective umbrella in case of a mishap. Despite the end of an insurance term, payments are continued even if the life cover period has ended. From the end of the policy period, it guarantees a payout of 8.5% to 9.5% and 100% at maturity.

Conclusion

Remember, no plan is bad. Every endowment or savings plan in India might have something for the individual looking to buy one for their needs. 

However, prior to making a decision, make sure you understand the details of the policy. An endowment plan is a must-have for your insurance and financial planning. Since they provide low-risk life insurance protection and wealth creation, investing in an endowment plan is best to combat inflation and reach long-term goals such as higher education, marriage, retirement, and travel.

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