Endowment Policy refers to coverage that lasts for a specific period. The company has to pay the sum assured in case if the policyholder dies during the policy period. This amount is paid to his/her nominee along with the accrued bonus. Moreover, if the term plan comes to its maturity and if the insurer is alive, he or she receives the assured sum and the bonus.
Taking an endowment policy allows you to save your hard-earned money for future financial security. Various companies offer different endowment policies, but considering the below factors will help you choose the best option.
- Understanding Your Saving Purpose
People take endowment policies to build their financial saving structure. The interval saving plan offered by these types of policies is ideal for salaried professionals and entrepreneurs.
Additionally, if you are unable to maintain regular savings and may need a massive amount of money in the near future for personal reasons, you should consider taking an endowment policy. The endowment policy is for anyone who wants to meet long-term financial obligations.
2. Features of the Plan
An endowment plan offers life coverage to the family along with an opportunity to save regularly for a specified period. You can use the maturity benefits to take care of your future financial obligations quickly.
The plan offers maturity benefits, but that is not it. In case the insurer dies during the term plan, the beneficiary gets the entire assured amount. Along with your loved ones’ financial security, under section 80 (C) and (10D) of the income tax act, an endowment policy is subjected to tax exemption.
3. The Right Time to Purchase an Endowment Policy
It is recommended to take an endowment policy at an early age. This way, you have a long time to save, thereby allowing you to accumulate a massive amount of money upon maturity. Moreover, investing in an endowment policy at an early age provides the advantage of acquiring initial insurance coverage.
4. Understanding the Types of Endowment Policy
Understanding the different types of endowment policy allows you to make a well-informed decision. Broadly, there are two types of endowment policy – with-profit policy as well as without-profit policy.
In a non-profit or without-profit endowment policy, a lump-sum amount is made on maturity or death.
There are different types of profit endowment policies. Basically, in this type of policy, there is no legally approved amount at the beginning of the policy. Profit endowment policies come with a risk of unreliability.
5. The Credibility of an Insurance Provider
Once you have selected the right type of endowment policy, it is time to choose a reputable insurance provider. A company that holds strong credibility in the market will provide valuable and reliable services.
Therefore, it is imperative that you assess the kind of reputation an insurance company has in the market before associating with them.
The right endowment policy can reinforce your saving structure and provide financial security to fulfil your future needs. Above are some facets that you need to consider before investing in an endowment policy.