Endowment insurance is a simple insurance cum savings plan that in addition to covering the insured’s life, allows the policyholder to save on a regular basis over a specific period of time. Such disciplined savings allow the policyholder to receive a lump sum amount or regular income to meet long-term financial goals such as children’s education, marriage, retirement, and so on. In the event of the policyholder’s unfortunate death, the endowment policy gives significant financial support to his or her beneficiaries.
In short, endowment insurance plans combine the requirement for life insurance and savings into a single plan. In this article, we will cover when it makes sense to buy the endowment plan.
When is an endowment plan the best option?
There is no doubt about the fact that there are many best term insurance available in the market that can provide higher coverage at reasonable premiums. In certain situations, an endowment plan may be the best option for the policyholder. Here are the scenarios.
1. Fills a Gap in Your Retirement Portfolio
An endowment policy might be a valuable addition to your current retirement portfolio. Assume you have estimated a sum that you believe will make up a good corpus after retirement. However, while you work, you realize that you are well short of the goal you had set then. To address this gap, an endowment plan can be purchased. One of the best features of an endowment plan is it pays out a lump payment at maturity. The guaranteed amount will be paid to the family as long as you pay the premiums on time and the policy stays active. Unlike other investment plans, one doesn’t need to worry about returns because your investment is safe in the endowment plan.
2. Want to protect your child’s higher education goals
After a Pandemic, there is a sense of uncertainty and as a parent, you don’t want to take any chances with your child’s education. An endowment plan can assist in ensuring that your child completes his or her higher education even if you are not present. Some of the insurance plans have a feature called “ premium protection plan”. If you select the option while purchasing the policy, the following scenarios will happen after your unfortunate demise death within the policy term:
a. A sum assured amount or death benefit will be given to the family immediately after the death.
b. The life insurer will pay the remaining premiums, and your family will receive the maturity benefit according to the customary maturity.
3. Want to protect our dependent’s future
What makes the endowment plan the sought-after plan is the fact it promotes the habit of saving. With the help of this plan, you will be bound to save some amount every month that can cover your dependents’ future requirements. At the time of maturity, you will receive the guaranteed maturity benefit, as well as any additional incentives that may be eligible under the conditions of your policy. The maturity amount can be used for your daughter’s marriage or your partner’s business endeavors.
An endowment plan can also help you reach other key goals, as well as those of others who depend on you. Let’s consider a scenario. You are now married and have children; your next aim is to buy a property 15-20 years from now on in Goa so that you can enjoy retirement. With endowment insurance, you can invest some amount and be able to accumulate a significant corpus after 20 years. In the end, you will be able to purchase a home without placing too much strain on your finances.
4. Want to leave a Legacy for the Grandchildren
An endowment plan can also help you think farsighted. You want to help both your children and your grandchildren achieve their ambitions by leaving a legacy for them. Although best-term insurance will also you to do the same, an endowment plan allows you to do so by helping you accumulate wealth over time, which is useful in the future.
5. Want to preserve your hard-earned wealth
What if you took a significant risk on an investment that turned out to be profitable? You now have a corpus with you. You don’t want to take any chances and keep the wealth you’ve built. The endowment policy is the best method you can use to park your funds. The wealth accumulated in an endowment plan is unaffected by the market and it is relatively free of market instability. As a result, your wealth grows while the principal amount remains stable. At the time of maturity, you will receive the expected maturity benefit and in addition, you are eligible for wealth boosters and loyalty additions which in turn increases the worth of your funds.
Eligibility Conditions for Endowment Plan
Before you decide if you need an endowment policy, here are the eligibility requirements:
- A basic endowment plan requires a minimum age of 0. This implies you can get an endowment policy for your child as soon as he or she is born. Some plans under the endowment plan may need a minimum age of 18 years.
- The maximum age to enter an endowment policy is 60 years Thus, you can invest or park your retirement assets in an endowment for legacy.
- The minimum age for maturity is 18 years. So, if your parents purchased an endowment plan for you while you were a minor, it’s a smart move to fund your education.
How Do I Choose Between Term Insurance and Endowment Plans?
It is easier to choose which is best for you once you understand the distinctions between term insurance and endowment plans. For you to do this, address the following aspects.
- Financial goal: Be certain of what you want to achieve in life and what your needs are. Depending on your needs, determine if you require solely the best term insurance, an investment, or a hybrid plan.
- Know your daily expenses: Keep track of both your present and expected future spending. Keep in mind the rising cost of living and inflation while calculating the total expenses. After considering both, you can choose between an endowment plan and term insurance.
- Affordability: It goes without saying that if you choose either best-term insurance or any other plan for that matter, you must pay the premiums on a regular basis in order to receive the benefits at the end. Term insurance has cheaper premiums, whereas endowment plan premiums are more substantial. Before making your decision, be sure it is within your budget.
- Life objectives: It is critical to identify your life goals and be clear about what you want out of your life 20-30 years from now. This can help you choose whether term insurance or an endowment plan is right for you.
Understanding the differences between the term and endowment plans is thus critical. The rest will fall into place naturally.
So we are saying,
If you can relate to any of these circumstances or have a similar financial aim, consider investing in an endowment plan. An endowment plan allows you to ensure that your family is financially protected even when you are not present. At the same time, knowing that your family is taken care of relieves stress.
