An endowment plan is a life insurance policy that helps the policyholder save regularly over stipulated time intervals. The individual who signed up is entitled to a lump sum amount when the policy matures in case the individual is able to survive the policy’s term.. This amount is used to meet the different financial needs like funding your children’s education or one’s retirement.
In an endowment plan, the policyholder gets the assured sum on a fixed date as per the terms and the conditions which are being mentioned in that respective policy.
Following are the three major Endowment plans-
1. The unit-linked endowment plan.
All the unit-linked policies as well as the insurance premiums are being bifurcated to many units, which are being held under a typical investment fund. The best part is that they can be ultimately chosen by the policyholder himself.
2. Complete/with profit endowment.
The basic amount in this plan will be provided immediately to the respective policyholder, and this amount is also being guaranteed right from the very beginning of that particular policy. Final payout is a little higher, and it depends on the bonuses which are being announced by the organization. The one that are declared automatically form a part of the policy. They are paid out either due to the policy’s maturity or the policyholder’s death.
3. Low cost-endowment.
The endowment policy is designed to allow the policyholder to accumulate all the funds that must be paid after a stipulated period, e.g., a mortgage.
4. Non-profit endowment.
It is an endowment policy which does not voluntarily participate in the profits which are generated by the organization. For making them competitive against all several other products; the organizations also offer additions to all the plans. It also helps in generating returns for the policyholder.
Thus, endowment plans are one of the traditional life insurance plans prevalent in the Indian market.
What are the features of an endowment policy?
1. Death, along with the survival benefits.
If there is a death of the insured, the policy nominee gets an assured sum along with other kinds of bonuses and the insured is also allowed to get the assured sum if the person outlives the policy.
2. Higher returns.
An endowment policy helps provide a financial protection to you as well as your family. The best part is that the payout for the survival benefit is comparatively higher than that of a pure life insurance plan.
3. The Premium payment frequency.
Holder of the policy can make any payment of the premium which is based on the policy they choose.
4. Low risk.
All the traditional endowment plans are safer than all the other investment plans, such as Mutual funds.
1. Reversionary bonus.
This bonus is the additional money which is ultimately added to the amount which is payable on the policy maturity or either the death of the policy owner and once this revisionary bonus is announced, one cannot withdraw it.
2. Terminal bonus.
It is the type of bonus that is paid out when a with-profits insurance policy comes to an end.