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Why Must You Select an Endowment Plan for Your Retirement?

21-June-2021 |

Investing in life insurance is considered a smart choice, as it is driven by the aim of securing the future without compromising on the needs of the present. However, the only catch is that your life insurance doesn’t consider the possibility that you might need the sum assured yourself. However, your endowment policy can help there! 


Buying an endowment plan or endowment insurance is of great help if you are looking to generate savings for your future. If you invest in endowment insurance today, then upon the maturity of this savings plan, you would have enough money generated to cushion your post-retirement finances.

An endowment fund of a life insurance policy is a contract between an insured and an insurer that qualifies the designated beneficiary of the insured person to acquire the lump sum upon the death of the insured party.

Besides, it offers a host of benefits to the policyholder and their family throughout the period of endowment insurance, such as income protection insurance, tax* exemption, and life coverage, to name a few. For this very reason, you could also think of your endowment insurance as an income insurance policy. 

For certain types of endowment plans, you would even get a certain deposit according to the provisions of the policy at regular intervals, while others offer a lump sum on maturity. Let us now see how this income protection insurance can help during retirement.

Endowment Plan for Retirement

 

Many of us know endowment plans to be a source of financial protection for our loved ones, but did you know your endowment plan could help you save for your retirement? Now you must be wondering what benefits can investing in an endowment policy provide when it comes to retirement?



First off, it is vital to know that investing in endowment insurance policies generates monetary benefits at maturity, which can be used for varied purposes like funding one’s retirement independently, taking care of daily expenses, or meeting even more ambitious goals such as buying a house. Moreover, several endowment plans are explicitly structured to meet the needs of whole life protection, post-retirement needs, additional expenses, and pension.

Since the average life expectancy rate has been getting better, it is essential to note that we should be looking at longer retirements and maintaining a decent lifestyle in the long run. As you age, the medical expenses associated with advancing age increase too. For these reasons, it is important to live your life on your terms independently once you cross 60.

There are threefold benefits of investing in retirement endowment plans:

  1. Endowment insurance helps you generate a source of income in your golden years. You will obtain the lump sum endowment in most cases, or if you have opted for a guaranteed1 income plan, you would have a guaranteed1 source of regular income as maturity benefits. This will help you take care of your medical and regular expenses.

  2. It will help you in securing the future of your children, especially in your absence. Your endowment fund gets shifted to your beneficiaries in case of an eventuality of you, the policyholder.

  3. Finally, you get tax benefits* of up to ₹ 1,50,000, and if you withdraw the insurance only after its maturity, most insured parties don’t have to pay a single rupee in tax. Certain exceptions are there for people who transfer endowment funds to their corporate bodies, real estate, or nominees.

 

So, if you have gotten the right endowment insurance, remember the keyword here is “right”, you can expect an easy, stress-free post-retirement lifestyle. If you are looking for some reliable insurance providers, we recommend Tata AIA Life Insurance online.

TATA AIA provides you with a lot of options to think over before you pick one. Choose from multiple retirement plans that are easy and convenient to understand and are uniquely curated with numerous investment strategies that would act as pension boosters to uplift your retirement savings.

What Are the Benefits of Endowment Policy?

An endowment policy offers varied benefits that make it worth buying. Life insurance can be a good investment because it helps the policyholder cover their personal loans and mortgage. This income protection plan provides the dependents of the insured person with income insurance, assures the insured and his/her/their family with stable peace of mind, goal-based savings, financial protection of loved ones, and a decent lifestyle.

Moreover, various top-ups and add-ons (premium dependent) can be added to make your policy more helpful, such as hospitalization cover, disability protection, etc.


It is for these reasons your endowment plan is also a guaranteed income plan.

Do You Have to Pay Tax*When an Endowment Policy Matures?

 

One of the most significant benefits of investing in an endowment policy is that it gives you a tax benefit on your premium and final withdrawals after maturity, that is! Please note that premature withdrawals from any savings plan will cause a penalty, and so is the case with a standard endowment fund, according to Section 80C and Section 10(10D) of the Income Tax Act, 1961

What Happens When an Endowment Policy Matures?

 

Upon your policy’s maturity, the insurance company will pay out the monetary lump sum as a form of maturity benefit. The maturity date differs for each type of endowment policy. However, this is possible only when the policyholder has paid their monthly or yearly premiums within the stated time. Once received, the insured person can use the maturity payment (or endowment) to live their retirement years peacefully, without relying on kin.

Please note that their nominees would still be paid the sum assured if the policyholder expires during the payment schedule.

The lump sum largely varies on the investment plans that are bought from a life insurance company. The maturity period also differs, ranging from 10 years to 15 years to 20 years or more. The lengthier the maturity period, the better is the monetary benefit since the amount accrued throughout the policy increases. Please note that apart from the policy tenure, your premium size also plays a huge role in determining the sum assured.

 
Endnote

Investing in an endowment plan for retirement is a wise choice. Not only does it secure your unforeseen and inevitable future, but it also calms your state of mind, knowing that there are guaranteed1 returns available at your disposal.

One should be familiar with the contract, premium payments, jargon, and their meanings before investing in an endowment plan for retirement. Contacting a professional for assistance is recommended.

 

L&C/Advt/2021/Jun/0966

 

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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!

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Disclaimer
  • 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 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.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry

  •  * 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.