Celebrating the strong bond of families: This is how Endowment Insurance can protect your family - Term Insurance Tips | Aviva India Blog Skip to main content

Celebrating the strong bond of families: This is how Endowment Insurance can protect your family

Arguably one of the biggest dilemmas that almost every single insurance seeker faces today is which type of life insurance to buy that could serve as protection for their family while also providing some financial benefits. Although, the objective of every life insurance policy is to safeguard your family against the various uncertainties life throws in your direction, not every policy comes packed with the same financial benefits. This, in turn, makes navigating the life insurance landscape quite a daunting task especially if you’re unfamiliar with the various types of insurance out there.

However, having said that, life insurance is a far flexible product than most people make it out to be– after all, there are several types of life insurance policies in the market that fits every budget and requirement. Endowment life insurance is one such type of an insurance product which despite being quite popular, remains under the radar as not many people are aware of its various features and benefits. Let's dive right in.

What is an Endowment Policy?

An endowment plan is a combination of an investment and an insurance plan that allows you to save for the future. Unlike a term insurance plan which only has a death benefit, an endowment plan bestows upon the policyholder both maturity as well as a death benefit. This basically means that the person is entitled to not only receive a sum assured on maturity but also in the event of the individual's unfortunate demise, his/her appointed beneficiary also stands to receive a death benefit as well.  Let’s take a look at how an endowment policy can help you achieve your financial milestones while also safeguarding you and your family against unforeseen circumstances.

1. Endowment plans come packed with a specified maturity benefit which is predefined. This basically entails that upon completion of the policy tenure,you are entitled to receive the entire corpus that you have carefully and patiently built over years of regular investing.

2. In case of any untoward incident which leads to your untimely demise, the sum assured will be payable to your family, if they have been nominated by you in the policy document. Furthermore in some types of endowment plans, in case of any financial emergencies, you are also allowed to withdraw money (up to a certain limit) from the corpus of your endowment policy.

3.If you have a regular stream of income and are looking towards building up a lump sum amount that you can make use of post-retirement, investing in an endowment plan can help you meet those goals. In an endowment policy, a part of the premium paid goes towards securing your life by providing you life cover while the remaining part of the premium is used for building a sizeable corpus which can help you enjoy that well-earned retirement. What more, thanks to the compounding effect, you will get a considerable return on the amount of sum assured. This way, an endowment policy can be used to meet any long-term financial security needs you might have.

4. Certain endowment policies come packed with a cashback benefit. These kinds of policies are designed to give out cash benefits at specified intervals in addition to the maturity pay-out. In that regard, this type of an endowment plan would be ideal for meeting any short and medium-term financial goals you might be looking to fulfill through regularly assured pay-outs. These goals could be anything – right from taking care of your child's higher education to going on a timely international vacation with your family– an endowment plan can help you achieve certain aspirations across various milestones in your life while also protecting your family all the way.

5. Certain endowment plans such as a participating plan, also declare a bonus every year which is typically given out as a certain percentage of the sum assured. This basically means that as a policyholder, you will be entitled to receive any additional bonuses that have been accrued over the tenure of the policy in addition to the sum assured if you survive the entire policy term. Furthermore, if at all something untoward were to happen to you, your nominated beneficiaries will still be eligible to receive the full sum assured along with the accrued bonuses.

6. In case you’re a risk-averse investor, endowment plans can often help in meeting your long-term financial security needs with little or no risk exposure. What this basically means is that if you're still looking to stay invested but are skeptical about investing in the stock market owing to the various risks involved, you can opt to go for a guaranteed endowment plan instead. This way, you will be able to maintain a safer, disciplined route for building up your savings thus helping cultivate a savings habit as well.

7. Endowment policies also double up as great tax-saving investments. Premiums paid can be used as a deduction from your taxable income under Section 80C of the Income Tax Act, 1961. Further, any lump-sum proceeds receivable as a death benefit are also entitled to deduction under Section 10 (10D). *

The Bottom Line

Buying an insurance policy must be done only after giving due thought and consideration. Hence, make sure that you clearly understand which product you’re looking to invest in and how it works. After all, it’s a decision that can financially impact you and your family’s entire life; so ensure that you take your time and accordingly make a wise decision. That being said, if you still do not have an endowment insurance policy in place for protecting your family, the question you need to ask yourself is why not?

Disclaimer: Taxes are subject to change as per tax laws

AN May 73/18

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