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3 Objectives that Perfectly Suit an Endowment Plan
24-June-2021 |
The quote “Failing to plan is planning to fail” best suits a financial saving habit. Starting early and ensuring regular savings help us in building a large corpus over the long term. Having sufficient savings means we can face the planned expenditure and unforeseen emergencies without stress. Thus, savings help in making tough situations appear less daunting.
Spending habits vary between people, but savings are a necessity for all. If you are a person who struggles to save regularly, you may not be well prepared to achieve your dreams. For people who need a convenient method to save, an endowment insurance policy might be a good product to secure their financial future.
What are Endowment Plans?
Endowment plans are money savings plans that offer dual benefits of wealth creation and life insurance coverage at a cost-effective price. These plans are non-linked and non-participating insurance plans, which essentially means that market movements have a minimal effect on the returns from these policies.
These plans run for a long duration to allow saving with a long-term perspective. They offer a fixed sum assured in the event of the policyholder’s untimely demise during the policy term. If the policyholder survives the term, they are entitled to a lump sum amount called the maturity benefit at the end of the policy period. Thus, endowment plans help in wealth creation and also provide adequate life coverage for the policyholder.
When is an Endowment Plan Suitable?
An endowment plan is suitable for the following three objectives
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Protection and safeguarding your loved ones
If you are looking to protect your loved ones by safeguarding their financial future, the endowment plan rightly serves the purpose. Since endowment plans help in wealth creation over a period and in parallel offer life cover, your family is protected in the event of your demise. The bonuses2 declared during the policy tenure add extra savings to your corpus that helps in retirement or meeting your family’s needs.
Saving for specific goals
Endowments plans are specifically taken to meet financial goals, fund a purpose, or fulfil one’s dreams. If you plan to buy a house or you have a need for a significant amount, endowment plans perfectly suit the purpose. Since these plans offer fixed and guaranteed1 returns, one can plan how much one needs to invest to achieve the desired figure to fund his goal.
Wealth creation over the long term
If you are looking to create wealth over the long term, endowment plans make the cut perfectly. Usually, endowments span over 15 to 30 years; the idea is long-term wealth creation with guaranteed1 income and bonuses2. Such a plan does not ask for a higher commitment of funds at a single time. Instead, it is done step by step by investing a significant amount yearly for several years.
What are the Different Types of Endowment Plans?
Broadly, there are four types of endowment plans.
Profit endowment plan - These plans are an investment option with a chance for high returns with the safety of capital protection. The profit in these plans depends on the performance of the capital market. However, regardless of market fluctuations, the policyholders are safeguarded with a guaranteed1 pay option on the savings made.
Non-profit endowment plans - These plans do not offer any bonuses2 on the savings made. There is a predetermined lump sum amount that the policyholder is entitled to upon maturity. If the policyholder dies during the tenure of the policy, the said amount is paid to the nominee. The degree of payout does not change in these plans. These plans act as a shield to your family by supporting them with a fixed sum.
Full endowment plans - Otherwise referred to as a pure endowment insurance plan or with a profit endowment insurance policy, these endowment plans offer a guaranteed1 amount that is paid at the end of the policy tenure. In the event of the policyholder’s death, the same amount is paid to the nominee of the policy. The most important feature of this policy is that the maturity benefit paid upon the policyholder's survival is always higher than the sum assured. This is due to the addition of bonuses2 that the company declares throughout the term of the policy.
Low-cost endowment policy - These endowment plans come with cheaper premiums than other policies. The primary purpose of these endowment plans is to create a lump sum for payments that the policyholder has predetermined according to his plans. The plan runs for a specified period to meet the expenditure of the policyholder. Usually, these plans are taken to create funds for paying mortgages, loans etc. The maturity amount is paid on policy completion. In case of the insured’s death, the sum assured is paid to the nominee.
What Should You Look for in Endowment Plans?
Stability of the insurance company
Life insurance claim ratio, that is the ratio of number of claims settled successfully to the number of claims lodged
Bonus2 and returns information of previous years
Proportion available for loan against the policies
About the Tata AIA Endowment Insurance Policy
Tata AIA endowment policies give good returns with a host of benefits. Some of these are
Guaranteed1 returns allow flexibility to plan your future goals
Option to choose any of the additional riders# to increase the protection offered
Freedom to pay a single premium or for limited periods
Option to pay your premiums annually, semi-annually, quarterly or monthly
Option to avail a loan against your policy
Tax* benefits as per the applicable tax* laws
Conclusion
Endowment insurance plans can be chosen for three crucial objectives in securing your family’s future financial needs. They offer life cover, help build a corpus by systematically letting you save over a period and protect against uncertainties by giving a guaranteed1 income. Therefore, choose an endowment plan and be stress-free about your family’s financial goals.
L&C/Advt/2021/Dec/2108
