5 Financial needs that an endowment plan can fulfil

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Ask any average working individual with children what their primary financial needs are, and you will find many common answers among them. Right from meeting their children's needs and saving up future goals, to reducing the burden of high taxes and having a source of funds for their post-retirement life, these financial needs are on everybody's wishlist.

Now, what if we told you there was one financial product that can help take care of a wide spectrum of financial requirements? Well, in that care, you would no doubt be curious to find out what that product is. Say hello to the endowment plan.

What is an endowment plan?

A savings plan or an endowment plan is a kind of life insurance plan that gives you two main benefits under one policy - insurance and savings. The insurance component involves the life cover offered by the plan, which lasts for a specific period known as the policy term. It protects your loved ones financially in case something untoward happens to you during the policy term.

The savings component, on the other hand, involves guaranteed returns that are paid out to you if you survive the policy term. These assured returns are risk-free and known well in advance, so you create your financial plan accordingly.

So, this is how an endowment plan works fundamentally. That said, it comes with several features and offers many benefits that can help you fulfil specific financial needs.

5 Financial needs that an endowment plan can fulfil

Want to know which of your financial needs can be taken care of by an endowment plan? Here are all the details.

  • Financial protection for your family

    Whether you contribute to your family in a financial or a non-financial manner, you will no doubt want to ensure that after you are gone, your loved ones are financially comfortable and not inconvenienced in any way. If you are an earning member, you will want to make sure that the loss of your income will not affect your family adversely. And if you are not an earning member, but take care of other aspects of your household, you will no doubt want your loved ones to be financially prepared to pay for assistance in your absence.

    An endowment plan can help take care of all these needs. The death benefit offered by the insurance provider in case of the insured person's demise is guaranteed and known in advance. This sum assured can keep your family financially secure, come what may.

  • Your children's education or wedding

    The cost of education has been on an upward path for some time now. In the coming years, it will only continue to rise. Assuming a rate of inflation of 6%, an engineering course that costs Rs. 12 lakh today could cost Rs. 21 lakhs or more in 10 years. The same can be said for other courses like MBA, MBBS, arts, science, and more. Similarly, the cost of conducting your children's wedding will also only go up in the future, since the prices of goods and services will be inflated.

    So, to meet these long-term goals in your children's lives, you need to be financially prepared. An endowment plan can help you here, because it includes a savings component. In case you survive the policy term, you will receive guaranteed maturity benefits from your insurance provider. These funds can help you take care of your children's education costs or wedding expenses.

  • Your long-term life goals

    Apart from your children's education and wedding, you and your spouse may have your own long-term life goals. For instance, you may want to buy a new home in the future, or you may want to extensively renovate your existing house property. You may want to take an extended vacation after you retire, or your spouse may want to purchase a new car down the line. The financial needs require significant money to be fulfilled.

    An endowment plan, with its guaranteed maturity benefits, may be just what you need to take care of these goals. You can purchase your endowment plan and choose a policy term that aligns with these long-term financial objectives. That way, the maturity payouts will be made just in time for you to meet these goals.

  • Tax saving advantages

    Let's say you work from the age of 20 to the age of 60. Over the course of these 40 years, you will see a number of pay hikes as you get promoted within your own company, or as you switch jobs between companies. So, it's safe to say that your income could see quite a bit of a rise during your working years. While that is undoubtedly a good thing, it also means higher taxes as your income rises.

    An endowment plan can help cushion the burden of rising income tax slab rates, thanks to the tax benefits it offers. As per section 80C of the Income Tax Act, 1961, the premiums you pay for your endowment plan can be claimed as deductions from your total taxable income - up to Rs. 1.5 lakhs each year. Furthermore, the maturity benefits you receive, or the death benefits your nominee receives, are exempt from tax.

  • Loan against the policy for emergency financial needs

    Another common financial need that you may have over the course of life is a financial emergency, like a sudden medical expense or an unexpected home repair. During such times, you may need urgent funds to take care of these costs. You can avail a loan against your endowment policy to handle these financial requirements.

    Most endowment plans allow you to avail a loan up to 80% of the surrender value of the policy. This limit, as well as the minimum amount of loan and the other terms and conditions may vary from one policy to another. But the bottom line is that you can use this feature to access some emergency funds if you are cash-strapped.

Conclusion

See how one single plan can be customised and tailored to your many needs? If you have some or all of these financial requirements unfulfilled, all you need to do is compare the different endowment plans available online and make your purchase right away. The sooner you invest in a life cover, the more you can enjoy the financial benefits it offers.

Read next: How to buy life insurance on a budget

Looking for a life insurance cover, but on a strict budget? Well, it turns out there are many ways to get a life cover even if you have some financial constraints in place. We have a blog that goes into the details of how you can buy life insurance without straining your finances too much.

Read it here

ONE PLAN, MULTIPLE BENEFITS - THAT'S WHAT THE ABSLI ASSURED SAVINGS PLAN IS ALL ABOUT!

The ABSLI Assured Savings Plan is an endowment plan that helps you take care of all the financial needs listed above. With just one policy, you can secure the future of your family financially, save up for your long-term goals, and reduce your tax burden.

In addition to this, you can even choose to protect your spouse under the same plan, and enhance the benefits with optional add-on riders. Plus, you can also avail a loan against the policy in case of any financial emergencies.

Know More

ABSLI Assured Savings Plan (UIN: 109N134V03) is a non-participating traditional insurance plan.
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