Ch. 6: Customization Options Available in Endowment Plans

If you’ve ever been to Starbucks, you would know how you can customise your drink as per your choice. If you don’t like too much ice in your drink, you can ask for light ice. You can customise your milk preference - there’s almond milk, coconut milk, soy milk, and other dairy-free options available. If you don’t like sugar in your drink, you can ask for a different kind of sweetener. And so on.

Similar to this, you can also customise an Endowment Policy so that it fits your and your family’s needs perfectly. We discussed the various types of Endowment Plans available in the market in the previous article. In this one, let’s learn about the various customisations available under an Endowment Plan.

Let’s dive right in!

Different Limited Pay Options

If you think you won’t be able to pay the Endowment Plan premiums until the very end of the term, you can select the Limited Pay option. With this option, you can pay off all your premiums in larger instalments early in life. And, you can enjoy a worry-free cover until the end of the policy duration.

You can choose a specific payment term - such as 10 years, 20 years, 30 years, etc. You can finish paying the premiums during the payment term you choose and get the burden off your chest.

For instance, Sagar, a 30-year-old, is planning to buy an Endowment Plan for a duration of 50 years. This means that the policy will remain active until he is 80 years old. He is planning to retire by the age of 60 years - so, he will not have any steady source of income once he turns 60.

Sagar intends to finish paying the premiums of the Endowment Plan before he retires. If he chooses the Limited Pay Option, he can finish paying off all his premiums while he has an active income, say, in the next 15-20 years. And, he can continue to enjoy the policy coverage for the rest of the tenure.

Endowment Plans allow you to customise how frequently you want to pay the premiums. Based on your convenience, you can choose to pay the policy premiums -

• Annually
• Semi-annually
• Quarterly
• Monthly

So, if you think you’ll be able to pay large amounts every year, you can choose the annual premium payment option. If not, you can choose any one of the other options.

Important: Regardless of the payment frequency you pick, make sure you set up auto-debit or standing instructions on your bank account. This will ensure that your premiums are paid on time and your policy doesn’t lapse.

With this option, you can cover both yourself and your spouse under the same Endowment Plan. Here, the sum assured applicable for your spouse will be equal to 20% of the sum assured applicable to you. Please note that this percentage may vary across policies.

Suppose Arnab buys an Endowment plan with a sum assured of Rs. 1 Crore. He chooses the Joint Life Protection Option while buying the plan. So, a sum assured of Rs. 20 Lakhs (20% of 1 Crore) will be applicable for Simran, his spouse.

The Joint Life Protection Option can only be chosen at the time of buying the policy. If you buy a plan with this option, both you and your spouse will jointly own the policy. And, you’ll be the primary life insured, and your spouse will be the secondary life insured under the Endowment Plan.

Now, let’s understand how the death and maturity benefits will be paid out in the unfortunate event of death of the primary or secondary life insured.

Let’s take Arnab and Simran’s example again. Arnab will be the primary life insured, and Simran will be the secondary life insured.

Scenario 1: The primary life insured passes away before the secondary life insured.

If Arnab passes away before Simran -

• A death benefit of Rs. 1 Crore will be paid to Simran.
• Simran will become the sole owner of the policy. The policy will continue - and she won’t have to pay any future premiums.
• If Simran survives the policy term, she’ll receive the maturity benefit.
• If Simran passes while the policy is active, the nominee will receive the death benefit of Rs. 20 Lakhs. On maturity, the nominee will get the maturity benefit and the policy will terminate.

Scenario 2: The secondary life insured passes away before the primary life insured.

If Simran passes away before Aman -

• A death benefit of Rs. 20 Lakhs will be paid to Aman.
• Aman will become the sole owner of the policy. The policy will continue with all the benefits, and Aman will have to continue paying the premiums.
• If Aman survives the policy term, he’ll receive the maturity benefit.
• If Aman passes away while the policy is active - the nominee will receive the death benefit of Rs. 1 Crore. On maturity, the nominee will get the maturity benefit and the policy will end.

Scenario 3: Both the primary and secondary life insured pass away simultaneously.

• In case both Aman and Simran pass away during the policy term, the death benefit of Rs. 1 Crore as well as Rs. 20 Lakhs will be paid to the nominee.
• All future premiums under the policy will be waived off.
• When the policy matures, the maturity benefit will be paid to the nominee, and the policy will terminate.

Riders are add-ons you can buy with an Endowment Plan at a certain extra cost. They will offer additional coverage under specific circumstances.

For instance, say you buy a waiver of premium on critical illness rider with your Endowment Policy. Now, if you're diagnosed with a serious illness that is listed in the policy document, this rider will waive off all your future policy premiums. Meaning, you can enjoy the cover for the rest of the policy duration without paying any future premiums.

Riders are one of the most convenient customisations. To opt for a rider, you don’t need to go through any extra documentation or medical tests - in addition to the ones you already do for your base Endowment Plan.

Here are some common types of riders available with an Endowment Policy -

• Critical Illness Rider
• Accidental Disability Rider
• Accidental Death Benefit Rider
• Hospital Cash Rider
• Surgical Care Rider
• Waiver Of Premium On Critical Illness Rider
• Waiver Of Premium On Accidental Disability Rider

These will be covered in detail in the next chapter.

So, this is all about customisations available under an Endowment Plan. Make sure you spend adequate time and effort to customise the premium pay model, premium payment frequency, riders, etc. This will ensure that your Endowment Policy is perfectly tailored to your and your family’s needs.