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Endowment Plans – Needs, Key Features and Benefits, Types, Policy Premium Calculator

Do you have a habit of shopping frequently? Even when you don’t really require them? If that is the case, and if you are a habitual spender then Endowment Policies is the best option for you.

An Endowment Policy is a Life Insurance Policy which helps the Policyholder to save regularly for over a specific period of time. It is a traditional Insurance plan that pays out a lump sum amount of money after the event of the death of the Policyholder. The beneficiaries/ nominees of the life insured receive the benefit which is called as the death benefit. The Endowment plan also works the similar way, but also has some additional clause that states that the lump sum payment will be made to the Insurance holder if he or she survives till the end of the specified period of time known as the “maturity period”.

There are different Endowment Policies such as there are some companies that have a lump sum payout due to the critical illness or other Life-changing events.

Features of the Endowment Policies

  • The sum assured in an Endowment Policy is payable either on the survival or on the death of the Policyholder.
  • The Endowment Policies are available “With Profit” and “Without Profit” plans.
  • The Endowment Policies offer bonuses for the full term, that is payable at the time of maturity or in the event of death.
  • Premiums of the Endowment Policies can be limited to a shorter term or can be paid as a single premium.
  • Premiums can be ceased on death or on expiry of the term, whichever is earlier.

Benefits of the Endowment Policies

  • An Endowment Policy will provide an Insurance cover during the Policy term.
  • This will also pay out a lump-sum amount at the end of the Policy term, which means the maturity of the Policy.
  • The Policy serves as a dual purpose, which states that it not only works as an Insurance Policy but also serves as a Long-term Investment, with decent returns offer.
  • The Endowment Policies come with tax benefits.
  • In terms of investing, the Endowment Policies are quite safer than that of the other investments and offer returns which are close to those which are offered by the mutual funds.
  • The Endowment Policies come with long-term savings.
  • With an Endowment Policy, it provides an assured considerable amount after maturity.
  • Most of the Endowment plans have the feature of extending will extend the Insurance coverage and promise the benefits after the maturity date. In some cases, the Life insured attains an age of 100.
  • The Endowment Policies have the option of opting for additional riders which provide cover for specific illness, critical illness, disabilities etc.

How do the Endowment Policies Work

The Endowment Policies are not that different to that of the regular Insurance Policies. These Policies not only serve the Life Insurance but also help them save regularly for over a specific period of time. Once the Policy has been matured, the Policyholder will receive a lump sum maturity amount which can be utilized for meeting the financial needs like purchasing the property, children’s education, organizing a wedding or preparing for one’s retirement.

What is the need for the Endowment Policies

Plan before you invest in something. Go through the benefits, returns on the investment etc. must be compared against the other investments that help you to save on the tax, in addition, to give you huge returns. An Endowment Policy is far less risky than the mutual fund investment. It serves a dual benefit to a Policyholder that is, it provides tax saving investment with guaranteed returns at the end of the term and also provides a comprehensive Life Insurance cover.

Types of the Endowment Policies

There are three types of the Endowment Policies they are:

  • Unit Linked Endowment- In this Endowment Policies, the Insurance premiums will be directed to the multiple units which are held under a specific investment fund which can be chosen by the Policyholders.
  • Full Endowment- Under this Policy, the basic amount is ensured to be provided and will be equal to the death benefit, starting from the Policy.
  • Low-Cost Endowment- This Endowment plan, has been introduced to provide accumulated funds which have to be paid after a specific period of time.

How to choose a correct Endowment Policy

Just like other Insurance plans, there are various types of Endowment Policies that are offered to the individuals. Individual needs, current Life stage, risk appetite are the few factors of the Endowment Policy. The premiums of the Endowment plans are pricier as compared to the term plans. Cost of the premium acts as a deciding factor. Besides that, there are some other factors that the Endowment Policy also provides such as the claim settlement ratio, financial status of the insurer etc. when choosing an Endowment Policy. Therefore, pick one which is simple and does not come with features and benefits which are difficult to comprehend and the details might get lost in the fine print.

Documents Required

The Documents that are required for an Endowment Policy:

  • Fully filled application form/ Proposal form
  • Recent passport size photograph
  • Proof of Residence/ Address Proof
  • Proof of Age
  • Medical Reports (optional)

Endowment Policy Premium Calculator

With the help of an Endowment Policy premium calculator, you can receive the details like the Premium Amount, maturity value, surrender value, loan value and returns of the Policy. The Endowment Policy premium calculators will tell you to enter the information such as your age, Policy term and the amount of the sum assured. By the given information, the Endowment Policy premium calculator will compute the premium which you will require to pay toward the Endowment Policy.

Riders of the Endowment Policy

Most of the Endowment Policies, offer additional features to enhance the protection provided by the Policy. Some of the commonly available add-ons which are available with the Endowment Policies are:

  • Critical illness
  • Waiver of the premium
  • Accidental death and dismemberment
  • Accelerated sum assured
  • Partial and permanent disability
  • Hospital cash

Some of the Popular Endowment Plans in India

Reliance Endowment Plan

Lump sum assured plus bonuses available on maturity, subject to 100.1% of premiums.

  • The death benefit of 10 times the annualized premium or base sum assured plus vested bonuses. Either that or 105% of all the premiums paid.
  • Policy term from 10-25 years.
  • Loan against the Policy is available.

LIC New Endowment Plan

Minimum assured sum of Rs 1, 00, 000.

  • The death benefit no less than 105% of the total premiums paid.
  • Death Benefit is higher of basic sum assured or 10 times the annualized premium.
  • Accidental death and disability rider available.

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