Endowment policy is a type of policy where risk is covered for a specified period. It is a very popular type of insurance in which both protection and savings are available. The Sum assured along with bonus is paid as maturity value at the end of the specified term chosen.
What is an Endowment policy.
This is a combination of both savings and risk. It helps to save regularly and encourages thrift. It gives guaranteed bonus additions for the Premium payment period. The maturity amount along with the bonus will be paid at the end of the period chosen. In case of the death of the Life assured at any time during the term of the policy, the full Sum assured will be paid along with bonus to the Nominee.
It is a low risk plan with guaranteed maturity amount at the end of the term selected. It provides the financial security to the Life assured during the term of the policy and to his family in case of an unfortunate death. The guaranteed bonus additions are calculated for the entire period of Premiums paid and will be paid at the time of settlement of claim. Final additional bonus would also be paid when the term is 15 years and above.
Suitable for individuals for long term investment with low risks.
In the event of the death of the policy holder during the term of the policy the Nominee receives the Sum assured along with bonus.
Loan is available against this policy after payment of at least 3 years Premium.
It allows the policy holder to opt for surrender of the policy at any time after payment of minimum stipulated Premiums.
Premiums can be paid for a limited period of time i.e, 5, 10 or 15 years while it offers full insurance cover for the entire term of the policy. Premiums under this plan can paid in a single one-time payment or regular payments which are monthly, quarterly, half yearly or yearly in nature.
This policy can be covered under the section 6 of Married Women Property (MWP) Act
Types of Endowment policies
With profits Endowment policy
This policy will have bonus additions at the time of claim only for the term for which Premiums are paid.
Without profits Endowment policy
Only basic Sum assured will be paid at the time of the claim without any bonus additions.
How to choose the best endowment policy
The wide range of Endowment insurance policies offered by insurance companies in India make it a challenge for an individual to make a decision on the policy that will be the best suited for him/her. Not just selecting a reliable insurance company, individuals also have to make up their mind on the specific needs for which the policy is aimed, from the wide array of endowment policies being offered by the same Insurer so that he/she can make a well-informed decision.
The purpose of opting for an endowment insurance is to have financial security for the family and also to meet the specific needs of the family viz, children education and marriage of the children.
The best endowment insurance is one that offers the highest Sum assured at the lowest possible Premium. This means that it is the best to start early because the younger you are, the lower will be the Premium that you can avail for a high Sum assured. You should keep a few essential parameters in mind to decide on your Sum assured, which will be analysed by the calculator to determine your Premium amount. One can see the claim settlement ratio of the company as well.
Who should buy
People who have regular earning can choose this policy. Those who aim for a lumpsum amount at a specified period can take this policy, as maturity amount is guaranteed.
Suicide within one year from the date of inception of the policy is not covered,
If the Life assured has deliberately not disclosed the pre existing diseases at the time of taking the policy and death happens within 36 months, the claim can be repudiated.
Most common Riders in endowment Insurance are:
Accidental Death Benefit Rider
Accidental Total and Permanent Disability Rider
Critical Illness Rider
Waiver of Premium
Hospital Cash Rider
HOW MUCH COVER YOU NEED
The minimum insurance one should have is 10 times of the annual income.
It is advisable to go for a term which suits an individual to help him/her when exactly he/she needs money to meet the responsibilities.
This policy not only offers protection but also offers Tax benefits under sec 80C, for the Premiums paid. The Death Benefit paid in case of death of the policy holder is exempted from sec 10(10D) of Income tax act 1961.