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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.

Regulator has made Aadhaar and PAN linkage mandatory for Insurance Policies

A new circular has been issued by the IRDAI (The Insurance and Regulatory Authority of India) which states that it is now mandatory for the insurance providers to link Aadhaar card with every single individual policy.

This circular has been sent to all the insurance companies where the Central Government made Aadhaar and PAN / Form 60 mandatory to avail services related to finance.

We have informed the companies that this is the law and they have to abide by it
says Nitesh Sathe, member of IRDAI.

The process to finish the linkage has been directed as well, where the process to link Aadhaar to the insurance policies would be same as the one adopted by the bank. This means that the insurers would be able to link the two documents either through the text messages, online or by visiting the branch.

In my view, it is a progressive and logical step towards creating a unified platform for financial services and, at the same time, promoting the government’s digitization agenda
said insurance MD and CEO Bhargav Dasgupta.

Earlier this month Supreme Court heard a plea which challenges the constitutional validity of Aadhaar Act and it also pondered over the question of privacy it raises surrounding the 12 digit unique identification number.

On the hearing SC refused to pass an interim stay on linking of Aadhaar with mobile numbers and bank accounts and ask the telecom service providers to let this issue to be decided on by the constitutional bench only.

Supreme court have also asked the service providers not to send SMS alerts to the customers stating that in case of incomplete linkage, the customers will be exempted from the service. Also bank accounts will be making inoperational, as this creates a fuss among the citizens.

Government has also fixed a deadline to complete the linkage. Earlier the deadline for  linking PAN with Aadhaar was July 31st but was extended to August 31 and later to December 31, 2017. And again the government has extended the deadline for the same for three more months i.e. March 31st 2017. And this is the third extension given by the government to individuals to complete the linkage.

Highlights

  • Regulator have mandated linking all your insurance policies to Aadhaar and PAN
  • In a recent hearing Supreme Court asked banks not to spread panic amongst the citizens by sending them SMS alerts regarding the deadline of the linkage

To know more about the hearing, read https://rupeenomics.com/linking-of-aadhaar-with-mobile-and-bank-ac

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) | 2018

The Pradhan Mantri Jeevan Jyoti Bima Yojana is a social security programme which was designed to provide life insurance coverage of Rs. 2, 00,000 (2 lakh) to all the subscribers on death due to any reason.

The scheme was introduced by the Honourable Prime Minister Narendra Modi along with two other social benefit insurance schemes Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana. These schemes are aimed at the poor and middle-class sections of the society.

The Objective of Pradhan Mantri Jeevan Bima Yojana (PMJJBY) is to make the insurance policies affordable to the poor and middle-class sections of the society who are unable to avail life insurance policies (especially health / accidental) due to high insurance premiums. Also as India’s younger generation don’t have any pension to take care after retirement, securing financial future of their family in their absence will be of utmost important which would be taken care under PM Jeevan Jyoti Bima Yojana.

List of Banks Participating in Jeevan Jyoti Bima Yojana

  • Canara bank
  • State bank of India
  • Bank of Maharashtra
  • Industrial Development Bank of India (IDBI) bank
  • Vijaya bank
  • Union bank of India
  • Jammu and Kashmir Bank
  • Karnataka Bank
  • Dena Bank
  • The Madhya Bihar Gramin Bank (MBGB)
  • Tamilnadu Mercantile Bank
  • ICICI bank
  • State bank of Travancore
  • Punjab National Bank
  • Punjab Gramin Bank
  • Syndicate Bank
  • Federal Bank
  • Corporation Bank
  • Jammu and Kashmir Bank
  • HDFC Bank
  • State Bank of Mysore

Click at the link to know the IFSC and MICR Code of any of these banks and their branches.

Role of the Participating Banks in Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

Apart from being the master account holders, banks have some other roles to play as well such as:

  • The primary duty of the bank is to transfer the deducted amounts to the insurers.
  • They will also have to look after the enrolment forms, authorisation of auto – debit, providing declaration-cum-consent form in the exact shape that they are supposed to be done.

Features of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

  • Rs.2 Lakhs i.e. after the death of the policy holder, this amount can be claimed by the nominee.
  •  Rs.330 only excluding the service tax. And this amount would be debited from bank account of the policy holder provided the person opts for long term option. In case long term option is not chosen then subscriber will have to opt every year.
  • This policy offers one-year life insurance scheme renewable from year to year.
  • Under this scheme the policy holder can exit the scheme at any time and join the same scheme in the future.
  • Participatory banks will be the master policyholder of this scheme.
  • Nominee can be declared at the time of buying the policy. And he/she can claim the benefits after unfortunate event of the death of the policy holder.
  • The cover under PMJJBY is for death only and hence benefit will accrue only to the nominee.
  • PMJJBY provides a convenient and a subscriber friendly insurance claim settlement process.
  • In case an individual is having a life insurance policy anywhere, then such person can still enrol for PMJJBY and avail benefits.
  • Individuals who fail to join the scheme in the initial year can join the scheme in subsequent years by annual premiums and submitting a self-certificate of good health.
  • The premium amount towards PMJJBY is eligible for tax deduction under section 80C.
  •  Termination Condition of the Scheme
    • If the person is above 55 years of age
    • If the policy holder is covered through more than one bank account
    • In case of insufficient balance in savings account to keep the insurance in force.

Eligibility Criteria under Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJBY)

  • Under this scheme, the minimum age limit is 18 years and maximum age is 50 years.
  • Cover would be available up to 55 years.
  • Should have a savings bank account. In case of a person does not have a bank account, can open a zero-balance savings account under Pradhan Mantri Jan Dhan Yojana (PMJDY).

Subscription Procedure of Pradhan Mantri Jan Dhan Yojana (PMJDY)

  • Open a savings bank account with any of the participating bank
  • Fill the application form provided from the bank
  • One can also provide a copy of Aadhaar Card as the primary Know Your Customer (KYC) document.
  • One can subscribe to this scheme every year in the month of June or they can choose a long – term subscription period where your account will be auto – debited every year.

Difference between PMSBY and PMJJBY

Feature Pradhan Mantri Suraksha Bima Yojana (PMSBY) Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
Age limit 18 – 70 years 18 – 50 years
Assured Sum 2,00,000 2,00,000
Premium (Annual) Rs. 12 Rs. 330
Cover ceasing age 70 55
Death Benefit (Not by accident) NIL 2,00,000
Death Benefit (By accident) 2,00,000 2,00,000
Disability of both eye, both hands, both legs or one eye and one limb 2,00,000 NIL

 

Disability of one eye or one limb 1,00,000 NIL
Maximum Cover 2,00,000 (From any one of bank account) 2,00,000 (From any one of bank account)
Risk Period 1st June to 31st May every year on deduction of premium 1st June to 31st every year on deduction of premium
Mode of Payment Auto debit from bank account Auto debit from bank account

Highlights of the Pradhan Mantri Jeevan Jyoti Bima Yojana

  • Eligibility: Available to people in the age group of 18 to 50 and having a bank account. People who join the scheme before completing 50 years can, however, continue to have the risk of life cover up to the age of 55 years subject to payment of premium.
  • Premium: Rs.330 per annum.  It will be auto-debited in one instalment.
  • Risk Coverage: Rs.2 Lakh in case of death for any reason.
  • Who Will Implement this Scheme? All the banks and insurance companies who are willing to participate in PMJJBY.
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