What Does An Endowment Life Insurance Policy Mean And How Does It Work?


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Endowment life insurance

If you have decided to invest in a life insurance policy, it is probably one of the wisest decisions you will ever make. There is no better way to ensure financial security for the future. However, given the wide array of life insurances to choose from, it is only right to get confused. The various types of life insurance policies include term insurance plan, whole life insurance, money back policy, savings, and investment plans, retirement plans, and ULIPs. But one of the most sought after insurance policies is the endowment life insurance plan. To know more about the endowment life insurance plan, first, we must understand what it means.

Endowment life insurance is a policy that offers you a combination of a term insurance plan and a savings plan. In simpler words, you purchase the this plan from an insurance company and continue to pay the premiums for a pre-decided time period. At the end of the term of the policy, the policyholder will be paid a lump sum amount on maturity. However, if due to any unfortunate circumstances, the policyholder does not survive the term, the insurance company will pay the amount to the beneficiary.

What are the features of an endowment life insurance policy?

Death and survival benefits

The policyholder gets paid in full at the maturity of the policy. And in case of the policyholder’s death, the beneficiary receives the money.

Higher returns

The payout at the end of the endowment life insurance plan is higher than the term insurance plan. This makes it a preferred choice of insurance policy for most.

Payment of premiums

The payment of the premium depends on the policy chosen by the policyholder. The frequency of payments could be monthly, quarterly, half-yearly, or yearly.

Flexibility

The policyholder has the option to avail the benefits of various riders that can come in handy in case of emergencies. For example, some plans offer a premium waiver rider that waives the payment of premium in case of critical illness or accidental disability.

Tax Benefits

The payments made towards an endowment life insurance plan are entitled to get tax exemption, under Section 80C of the Income Tax Act, 1961.

Low Risk

If you compare the insurance plans to other investment options like ULIPs and mutual funds, you will realize that the former is low risk. This is because your money isn’t invested in equity and share market.

If you are looking to save for a financially secure future, consider investing in an endowment life insurance plan today.

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Nirmalya Ghosh
Nirmalya has done his post graduate in business administration and now working as digital marketing executive in a US based firm. He loves to share the trending news and incidents with his readers. Follow him in Facebook or Twitter.