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5 Things You Must Know Before Purchasing an Endowment Plan

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02-08-2022 |

A life insurance policy is a legal contract between a policyholder and an insurance company. With a life insurance policy, you get financial security and the ability to protect your family if something unfortunate happens to you. They are excellent instruments to ensure your family will stay protected in your absence. However, a normal insurance plan's features end here. Apart from the insurance coverage, a normal insurance plan will not offer any distinctive features to the policyholder. If you're looking to buy an insurance plan that will provide you with assured returns and the ability to build wealth systematically, you must learn about endowment policies and their features

 

What is an endowment plan? 


An endowment plan is an insurance policy that provides a sum assured to your family members in case of your sudden demise. These plans will help the insured save some amounts over a particular tenure to get a lump-sum amount when the plan reaches maturity. However, if you outlive the policy, the plan provides an option to receive the amount as a maturity benefit. The maturity benefit can be with or without a bonus2 as per the option chosen. With an endowment plan, you can get the dual benefit of building savings along with insurance coverage.


With an endowment plan, you can build a financial net for your future, achieve your short-term and long-term financial goals and ensure insurance coverage for your loved ones.


While the plan may seem extremely fruitful and beneficial, you must purchase it diligently. Therefore, you can rely on the list below to ensure you purchase the best endowment policy


Five things you should know before buying an endowment assurance policy:

  1. Distinctive features of the endowment plan:

    An endowment plan is an insurance policy that offers insurance coverage and the ability to save systematically over a specific tenure. With the endowment plan, you can get a lump-sum amount when the plan reaches maturity. You can fulfil all of your financial requirements with the maturity benefits like funding your children's education, buying a house, marriage, and retirement planning with an Endowment plan.

    The endowment plan provides a maturity benefit and financial protection to the policyholder's family if they meet their untimely demise. Therefore, endowment plans allow you to protect your family and build wealth at the same time.

    With an endowment plan, the policyholder can:

    - Secure the future of their loved ones.

    - Tax* benefits under Section 10D and 80C of the Income Tax Act.

    -Option to avail loan against the policy in the event of an emergency. 

  2. Who will benefit from an endowment plan:

    Endowment policies can benefit individuals with low financial discipline, as the plans would function as a financial backup. If the policyholder requires a significant amount, the endowment plan will help them systematically build savings. These plans are optimal for individuals who want to achieve their long-term financial goals and secure their loved ones financially when they're not around anymore.  

  3. Right circumstances for purchasing an endowment life insurance:

    It is advised that every individual should have a risk-free guaranteed1 investment plan. Therefore, when you're deciding to purchase an endowment plan, it should ideally cover three areas:

    - Financial stability of your loved ones in your absence

    - Achieving a financial goal

    - Build savings to achieve investment objective over a long period

    However, it is essential to remember that you must purchase the regular premium plan only when you have a consistent regular income flow to pay the premiums regularly promptly. Endowment policies are advantageous as they are long term plans and offer better returns over a long tenure. 

  4. Why you should get the Endowment plan:

    A major reason why an individual should get the endowment plan is that it provides an opportunity to accumulate funds in a systematic and disciplined manner. These plans help in fulfilling future financial needs. Along with this, an advantage of the plan is that the policyholder will get life coverage with the opportunity to build a financial corpus for a stable future. 

    The lower level of risk attached to the plan's returns makes them quite optimal. Along with this, the policyholder also gets tax* benefits on the returns obtained from the plan. Therefore, these features make the endowment plan optimal for risk-averse investors as they also provide guaranteed1 returns with insurance coverage. 

  5. Factors to note when purchasing an endowment assurance policy:

    As you can choose from a wide range of options available for an endowment plan, choosing an apt policy for yourself will depend on various factors. These factors include your needs, current life stage, risk profile, income, etc. If you're planning to invest a huge amount in the endowment plan, you must always compare the quotes before investing. When you check the premium rates of the different plans available, you will select the perfect plan for yourself.

    It would help if you checked the company's track records. Endowment plans are considered safer for a long tenure. As return rates play a crucial part in deciding on the savings options, buyers must learn about the bonus2 amount offered by the policy. You must also learn about the claim settlement ratio, customer service, financial stability and the company's track record. 

 

Summing up:


Hence, if you wish to maximize the benefits you gain from an endowment life insurance, you must for the plan that you understand thoroughly. If you keep all the points mentioned above in mind when purchasing an endowment plan, you will end up with the most suitable plan for yourself. 


If you are looking out for endowment plans, check out Tata AIA Life plans under our Savings Solutions. You can enjoy flexible premium payment modes, multiple income payout methods, the ability to avail of joint cover, the option to get a return of premium on maturity, the choice of attractive riders# and much more.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • 2These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry