An endowment policy is a life insurance plan that pays a lump sum amount after a specified term (on 'maturity') or in case of an unexpected event. Typical maturity periods of endowment plans are 10, 15 or 20 years. If you want both protection and savings in one solution, endowment plans may be the answer you are looking for.
How are endowment plans different?
· Unlike term insurance plans endowment plans combine the elements of insurance and investments.
· The premium you pay is partly used for providing insurance coverage and partly invested to generate good returns. Hence, generally the premium of these policies is higher than the premiums for term plans.
· The coverage amount is payable to the beneficiary in case the policy holder passes away. This is called death benefit.
· If the policy holder survives the entire term, he will receive the sum assured and a bonus, if any. The bonus is not guaranteed because it depends on the performance of the insurance company.
Should you choose an endowment plan?
Compared to a term plan, endowment plans may have a higher premium or coverage amount, but they offer the convenience of regular savings. If you are looking for protection as well as savings in the same solution, endowment plans may be a perfect fit for you. These plans can also be used in case you need a certain sum of money at a particular age in the future.
• You will not receive any surrender value for an endowment policy if you surrender it within the first three years.
• In case you surrender the policy after a period of three years, you will get back all your premiums after deducting the expenses.