An endowment plan works as a great investment tool for individuals who are looking to build strong financial support and security for the future.
Just like any other life insurance policy, one needs to pay premiums for a specified term and get a lump-sum amount as a maturity benefit.
The access to promised maturity amount, survival benefits, and additional bonuses are what make it a profitable option.
However, before going ahead with such a policy, there are certain aspects individuals must take into consideration before buying the endowment plan.
Factors to Consider Before Buying an Endowment Plan
Looking at the endowment policy meaning, one can understand that it is not a mere life insurance policy. It pays out a sizable one-time amount when the maturity period ends or upon death.
The lump-sum amount the policyholders or their nominees get to be eligible for can help them meet necessary financial requirements.
In order to make the most of its benefits, individuals must check the important aspects related to this particular policy. Find these factors below:
1. Premium Payment Terms
The premium-payment terms that insurance providers offer on endowment plans keep changing. Policyholders get adequate flexibility in terms of premium payment.
This means one can choose any premium plan at his/her convenience.
Suppose, for salaried individuals, regular premium terms work better. Others may also go for bi-annual, monthly, or even one-time premium payments.
While buying an endowment plan, one should check other financial liabilities and pick the payment date accordingly.
2. Add-On Riders
With such endowment policies, individuals get the convenience to go for additional riders and attach to their plan.
This inevitably helps them to enhance the coverage of their policies and get additional benefits to safeguard their future.
Riders like critical illness cover, total or partial disability cover, accidental death cover, etc., are generally available on top of these endowment plans.
Individuals can choose among them according to their needs.
3. Premium Amount
The exact premium amount one has to pay each year should be checked beforehand. If someone decides to go for additional riders, he/she must evaluate the exact amount based on that.
The premium amount usually gets increased when a policyholder opts for riders.
This is why comparing different insurance aggregators and the payable premium amounts is necessary before making a decision.
4. Income Tax Benefits
Under Section 80C of the Income Tax Act, 1961, individuals possessing an endowment policy get to claim tax deductions of up to Rs.1.5 lakh.
This particular tax exemption is generally available on the premium one pays for a specific financial year.
Therefore, going for such a life insurance policy, make sure to understand the available tax benefits.
This way, one will be able to save a significant amount even after paying a large amount on insurance premiums every year.
5. The Type of Endowment Plan
Reputed insurance aggregators offer several endowment policies.
From low-cost endowment policy to limited payment endowment policy, unit-linked endowment policy, joint life endowment policy, etc., individuals get multiple options to choose from.
Since each of them comes with a specific set of features, one must go through the applicable benefits before picking one.
Online aggregator platforms present a host of policies from leading insurance companies of this country. Individuals can now compare and learn about them in detail to find one that fulfils their requirements.
Apart from these aspects, individuals should also look for claim settlement ratio, bonus rates, customer service quality, etc., before investing in an endowment plan.
Note that certain inclusions and exclusions are applicable for each type of policy, which vary across different insurers.
This is why it is essential to compare them to obtain the utmost financial protection for themselves and their close ones.