life insurance company
Endowment Plans

Endowment Policy

An endowment policy is a type of life insurance policy that has both an insurance and a savings component. The plan enables you to save regularly over a certain period of time in order to receive a lump sum payment at policy maturity in case the policyholder survives the duration of the policy. However, if the policyholder dies unexpectedly, the insurance company will pay the sum assured to the policyholder’s nominee.

A good endowment policy provides us with the security and tax-free returns we need to meet future crises while also allowing us to fulfil non-negotiable life goals like paying for our children’s weddings and educations or living a dignified retired life on our own.

What Are The Types Of Endowment Policies?

There are four different types of endowment plans to choose from:

Unit Linked Endowment Plan

Unit Linked policies divide insurance premiums into several units that are held in a specified investment fund that policyholders can choose. The fund’s return on investment totally depends on its market performance. Individuals with a high-risk appetite and a desire to earn a high return on investment should choose this plan option.

Full/With Profit Endowment

The policyholder will get the basic amount, or sum insured, under the Full/With Profit Endowment plan. This sum is guaranteed from the beginning of the policy. However, depending on the bonuses declared by the corporation from time to time, the final payout paid is significantly greater. Once declared, the bonuses become part of the policy and are paid out in the event of the policyholder’s death or the policy’s maturity.

Non-Profit Endowment

Under a Non-Profit Endowment policy, a sum assured amount is paid to the policyholder or the policy recipient as a maturity benefit or as a death benefit. The plan does not receive a share of the company’s revenues. However, in order to compete with other products, companies offer guaranteed modifications to these plans, which assist the policyholder in generating returns.

Low-Cost Endowment

This sort of endowment plan was created with the goal of allowing the policyholder to collect funds that must be paid after a set period of time, generally a mortgage. The target amount is paid to the insurance recipient as the minimum sum assured if the insured dies during the policy period.

What’s So Special About Endowment Policies?

Endowment plans are meant to pay out a lump sum payment at the end of the policy term, also known as maturity, or upon the policyholder’s death. It offers the policyholder a living benefit in the form of payouts in addition to insurance coverage. Let’s know why endowment policy is a good investment:

  1. They Serve Dual Purpose

An endowment policy serves a dual purpose in that it not only acts as an insurance policy but also as a long-term investment product.

  1. How About Availing Tax Benefits?

Endowment plans come with various tax benefits that you can count on. Section 80C of the Income Tax Ac1 allows you to reduce your taxable income by paying premiums. There are other tax benefits available when endowment policies mature. This enables you to save money on taxes during the policy’s commencement and maturity stages.

  1. They Are Low-Risk Investments

Endowment policies are known to be a safer investment option than other types of investments when it comes to investing.

  1. Long-Term Savings? – Endowment Policy Is The Key!

An endowment policy is a long-term investment. You have the option of selecting an insurance term of 10, 15, 20, 30, or 40 years.

  1. You Get Life Insurance Benefit

The life insurance benefit of an endowment plan provides a lump sum payment and guarantees that your family members can continue to live worry-free lives that you have so carefully planned for them even if you pass away.

  1. You Can Add Riders As Per Your Needs!

Endowment insurance gives you the option of adding additional riders to your policy, such as critical illness coverage, family income benefit, premium waiver, accidental death benefit, and accidental permanent total/partial disability coverage.

  1. How About Availing Maturity Benefits?

As long as you pay your premiums on time and keep your endowment insurance active, The maturity benefit is guaranteed to the policyholder. This amount will help you achieve your financial objectives.

  1. You Also Get Loan Benefits!

Endowment policies can be used to take a loan. Once your policy has a surrender value, you can receive a policy loan. The interest rates on these loans are relatively lower than others.

  1. Flexible-Premium Payment Options

The policyholder can pay the premium according to the insurance he or she has chosen. Monthly, quarterly, half-yearly, and yearly payments are available under an endowment plan.

  1. You Get Additional Bonuses

Various endowment plans provide additional bonuses to the insured person. The bonus is the additional amount of money added to the proceeds that an insurer distributes to the policyholder.

Top 5 Endowment Plans

1. Bajaj Allianz Save Assure Plan

The Bajaj Allianz Save Assure Plan is a non-participating, non-linked, individual endowment plan with a limited premium payment. You can pick between two policy terms, 15 or 17 years, with this plan. During the last five years of the coverage, you will not be required to pay any premiums.

Key Features:

  • Death Benefit: The sum assured at death is payable as a death benefit if the policyholder has paid all due premiums under the plan and the life assured has died.
  • Policy Loan: If the insured has paid the premiums for three years, he or she is eligible for a loan under the plan. The loan is equal to 90% of the surrender value.
  • Grace Period: If the policyholder fails to pay the premium by the due date, he or she will be given a grace period of 30 days.

Eligibility:

Minimum Entry Age1 Year
Maximum Entry Age60 Years
Minimum Maturity Age18 Years
Maximum Maturity Age75 Years
Policy Term15 & 17 Years
Sum Assured

Minimum: 1 Lakh

Maximum: No Limit

2. Bharti AXA Life Elite Advantage Plan

Bharti AXA Life Elite Advantage is a classic non-participating savings and protection plan that provides life insurance coverage and guaranteed annual payouts upon maturity or death to provide for the family.

Key Features:

  • Regular Inflow Of Cash: Bharti AXA Life Elite Advantage plan offers a regular inflow of cash through guaranteed annual payouts.
  • Grace Period: The policyholder will be awarded a 30-day grace period if he or she fails to pay the premium by the due date.
  • Free Look Period: In case the policyholder is not satisfied with the terms and conditions of the policy, he or she can cancel the policy within 15 days of the policy’s commencement.

Eligibility:

Maturity Benefit8.5% To 9.5% Of Sum Assured
Premium Payment Terms5, 7, & 12 Years
Policy Term10 & 12 Years
Minimum Entry Age

For 10 Years Policy Term: 8 Years

For 12 Years Policy Term: 6 Years

Maximum Entry Age65 Years

3. HDFC Life Endowment Assurance Policy

The HDFC Endowment Assurance Plan is a standard participating endowment plan in which premiums must be paid until the policy tenure is completed, which is 10 years.

Key Features:

  • Death Benefit: If the life insured dies during the policy term, the nominee will receive the base sum assured plus any accrued reversionary bonus as a death benefit, and the policy will be terminated.
  • Maturity Benefit: At the policy’s maturity, the life insured receives the basic sum assured plus the reversionary bonus as a maturity benefit, and the policy is terminated.
  • 3 Additional Riders: The plan allows the insured to choose from 3 additional riders namely, Critical Illness Benefit Rider, Accidental Death Benefit Rider, and Waiver of Premium Benefit Rider.

Eligibility:

Minimum Entry Age18 Years
Maximum Entry Age60 Years
Policy Term10-30 Years
Payment ModesYearly, Half-Yearly, Quarterly, & Monthly

4. ICICI Pru Savings Suraksha Endowment Plan

ICICI Prudential’s ICICI Pru Savings Suraksha Insurance Plan is a non-linked insurance plan. The plan provides a guaranteed maturity benefit, which can be used to accomplish financial goals such as homeownership, children’s education, dream vacations, and stress-free retirement.

Key Features:

  • Guaranteed Additions (GA): Under the plan, 5% of guaranteed addition is provided to the policyholder.
  • Guaranteed Maturity Benefit (GMB): A lump sum amount is provided to the policyholder at the end of the policy term.
  • Flexible Options: The plan provides the policyholder to choose various options of the policy term, sum assured, and premium payment.

Eligibility:

Premium AmountRs. 12,000 Per Annum
Premium Payment OptionsMonthly, Yearly, & Half-Yearly
Policy Term10 To 30 Years
Entry AgeUp To 60 Years

5. LIC New Endowment Policy

The LIC New Endowment Plan is a non-linked, participating plan that offers a great combination of protection and savings. This combination gives financial support to the family of the deceased policyholder at any time prior to maturity, as well as a good lump sum payment for the surviving policyholders at maturity.

Key Features:

  • Death Benefit: The nominee would be paid the “Sum Assured on Death” along with vested bonuses as a death benefit if the life insured dies within the policy tenure and the policy would be terminated.
  • Maturity Benefit: The policyholder will receive a sum assured + accumulated reversionary bonus + final addition bonus (if any) as maturity benefit if they live to the end of the policy tenure, and the policy will be terminated.
  • Additional Riders: Under the plan, one can also take accidental death and disability benefit rider.

Eligibility:

Minimum Entry Age8 Years
Maximum Entry Age55 Years
Minimum Basic Sum AssuredRs. 1,00,000
Maximum Basic Sum AssuredNo Limit
Policy Term12 To 35 Years

Who Should Avail Of An Endowment Policy?

Anyone, from a young professional to a senior citizen, can gain profit from an endowment policy. Most of us have responsibilities towards our families that we must fulfill. In addition, most of us have long-term, non-negotiable goals that must be achieved no matter what. You should buy an endowment plan in the following cases:

  • If you want a low-risk plan that provides both insurance and investing benefits.

  • If you want to invest with no risks.

  • If you are searching for a lump sum maturity for long-term objectives.

  • If you wish to save little amounts of money over time while also receiving tax benefits.

What Key Things You Should Consider Before Purchasing An Endowment Policy?

Various endowment policies are available in the market. What’s the greatest way to find the best one? Following are the things that you need to consider before buying an endowment policy:

  1. Cost Of Premiums: For most insurance clients, the cost of the premium is the primary consideration. A modest premium is required since endowment insurance is a long-term investment. You may be forced to terminate due to financial limits if you pay a higher premium.

  1. Flexibility Option: Check whether or not your insurer is providing flexibility options. Endowment plans offered by various insurers provide flexible options. Those who are salaried can choose a regular endowment policy, but those who have irregular income can choose a single payment option or a limited premium payment option.

  1. Claim Settlement Ratio: The claim settlement ratio (CSR) is the percentage of total claims that an insurance company settles in a year. It serves as a measure of their reliability. Therefore, before you purchase a health plan, always check how well the company handles its claims. You should buy an endowment policy from a company with a high and consistent claim settlement ratio.

  1. Simple & Fast Claim Process: Claim process that is straightforward and quick should be chosen. Purchase insurance from a company that allows you to report claims online, at branches, at the central office, via SMS or email, and so on.

  1. Insurer’s Financial Status: An insurer’s financial stability is crucial. Purchase endowment policies from an insurer with an independent financial strength certification.

  2. Check For Riders: Some insurance companies include riders as a standard feature, and one should make use of it whenever possible. Education endowment, double endowment policy, and marriage endowment policy are a few examples of additional benefits.

  1. Bonuses: The insurance company will declare bonuses based on how well the company has performed. At the end of each financial year, the insurer distributes a portion of the earnings earned from its investments to policyholders.

Working Of An Endowment Policy

Endowment plans are similar to standard insurance policies in that they provide a steady cash flow. They not only give life insurance but also assist you in saving on a regular basis. And, assuming the policyholder has survived the policy period, he or she will get a lump sum payment when the policy matures. This money can be used for things like buying a house, paying for your children’s education, or saving for retirement.

For example Mr. X purchases an endowment policy of Rs. 6 lakhs for 20 years. The premium amount is Rs. 37,678. In case the policyholder dies during the term of the policy, the nominee will get a fixed amount of sum assured. If the policyholder survives the policy tenure, he or she will get the sum assured along with bonuses.

Difference Between Endowment Policy & Term Insurance Plans

ParametersEndowment PolicyTerm Insurance Plan
PriceAn endowment plan offers a maturity benefit as well as loyalty bonuses. The cost of an endowment policy rises as a result of these new features.A term plan is less expensive since it provides risk protection rather than a return.
Sum AssuredIn comparison to term insurance, the sum assured in an endowment plan is lower. This is due to the fact that an endowment plan fulfills the demand to save.The sum assured of a term insurance plan is the highest. This is due to the fact that it only provides risk coverage, which is adequate for your protection needs.
CoverageAn endowment plan provides both life insurance and a savings option. In the event of your death, your nominee receives the death benefit. You get a maturity benefit if you live longer than the policy period.A term life insurance policy provides pure life coverage. It’s a straightforward life insurance policy that guarantees payment of a sum assured if the policyholder dies during the policy period.
Payout OptionsThe payout in an endowment plan is a lump amount either on the policyholder’s death during the policy term or as a maturity benefit at the end of the policy period.The policyholder can personalize the payout option for a term plan based on his or her family’s needs. It can be a one-time payment, a monthly payment, or a mix of the two.

How Can You Buy An Endowment Policy?

You can buy an endowment policy both through an online and offline method. Let’s have a look at their processes:

ONLINE PROCESS

  1. Go to the company’s website, for example, www.hdfclife.com, and click on the online insurance banner.

  2. Select the investment amount.

  3. Fill the application form and upload documents.

  4. Make payment via a range of options including credit card, net banking, debit card, and payment wallets.

  5. Once the payment is done, the plan is issued to you.

  6. The plan details will be sent to you at your registered mail address.

OFFLINE PROCESS

  1. Visit the nearby branch of the company from which you wish to buy an endowment plan.

  2. A customer service executive will make you understand the terms and conditions of the policies sold by the company.

  3. Choose a suitable endowment plan for yourself.

  4. Submit all the necessary details and documents to the insurance company.

  5. Once your documents are verified, make the premium payment.

Documents Required

  • Photograph

  • Age proof

  • Address proof

  • Duly filled application form

Claim Process Of Endowment Policy

In order to claim against your endowment policy, you need to follow the below-mentioned steps one by one:

  1. Informing The Insurer: The nominee of the policy should inform the insurance company soon after the death of the policyholder.

  2. Filling The Claim Form: The claim form should now be filled and signed by the nominee.

  3. Submitting Documents: All the essential documents must be submitted to the company.

  4. Verification: The company will then verify the documents and settle the claim accordingly.

Frequently Asked Questions

1. Is it wise to invest in an endowment plan?

Endowment plans are a wonderful way to invest. These plans are advantageous since they are long-term and provide significant returns over time. One of the most important benefits of an endowment plan is that it allows you to invest money in a systematic and well-organized manner to fulfil your financial goals.

2. When is it appropriate to get an endowment policy?

Although endowment plans are appropriate for people of all ages, the best time to purchase one is as soon as possible. An endowment plan might assist you if you have a family to care for and wish to ensure their future in your absence. The earnings on such plans grow over time and can be used to fund expenses such as children’s education, debt repayments, and so on.

3. What happens if you stop paying premiums on your endowment policy?

If you cancel the plan after reaching the surrender value bar, you will be given the surrender value. The guaranteed surrender value as well as the cash value of the vested bonuses will be paid to you. You will not receive any benefits if your insurance has not reached the surrender value.

4. Is it possible for me to purchase an endowment plan for my child?

Yes, you are the policyholder in this scenario, and the child will receive a lump sum payment in the event of the policyholder’s death.

5. Is it possible to change the beneficiary of my endowment policy in the middle of the policy's term?

Yes, during the policy’s term, the beneficiary can be changed. The insurance must be notified in this scenario.

6. Is it possible to surrender an endowment policy before the policy's term expires?

Yes, an endowment plan can be surrendered after the policy has developed a surrender value, which typically takes two to three years depending on the policy term and premium payment period. You will be able to receive the guaranteed surrender value or the special surrender value, whichever is higher if you surrender the policy.

7. In the case of endowment plans, can policyholders choose to increase the sum assured during the policy term?

Yes, policyholders can choose to increase the sum assured, subject to the terms and conditions of the insurance company’s policy. And, if this option is available to you, it can be used during significant life events such as the birth of a child, formal adoption, and so on.

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