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Aditya Birla Sun Life Insurance Company Limited

Figuring out endowment plans

As hard as you work, it seems like your money just disappears from under your nose! It would almost appear as if you deposit your hard-earned money in a special bag that has no bottom – because however much you work, it is just not enough!

Rising living costs and inflation serve to curtail most of your income while you are still paying for the essentials such as children's education, household expenses and groceries. You are willing to work all the hours in a day but at the end of it all, you are still left with several unrealised dreams and insufficient money. As your children grow up and make demands of their own, you wonder if you will ever be able to amass enough wealth to make your loved ones' dreams come true.

In the midst of these worries is a bigger one: what will happen to your family if you are no longer present in their lives? Can they sustain themselves when there is less money to begin with?

It is time to stop worrying and take affirmative action. It is time to explore a useful insurance product known as the 'endowment plan'.

What is an endowment plan?

An endowment policy is an insurance plan designed to offer protection with life coverage and the chance to grow wealth through systematic savings. It encourages the policy holder to save money regularly so that he may have a large corpus of money waiting for him in the future. There is also the prospect of capital growth over a long term.

Benefits of endowment policy

The most important endowment policy benefit is that it offers better returns on investment than fixed deposits or simple life insurance policies.

The endowment plan benefits the policy holder thus: he chooses the frequency of premium payment (monthly or annual). This payment is actually the premium payment for the policy. The insurance provider now splits the money paid into two components:

  • One is paid towards the plan premium.

  • The other is invested in high quality equities or other market instruments.
    This second component fetches good returns on capital investment over a long period of time. In reality, these returns are sourced from the profits of the companies that the endowment plan invests in, and is given to the policy holder in the form of bonuses.

The plan's maturity benefit includes terminal bonus and reversionary bonus. Also, the policy holder gets excellent tax benefits on investing in endowment plans.

Hence, with an endowment plan the policy holder is not just investing money and gaining returns on it but also arranging for a valuable corpus of money that his family can use in his absence. The endowment plan results in a large savings fund that can be useful for a variety of personal purpose, business purpose or simply in times of need by your loved ones.

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