Endowment Policy: Questions to Ask Before Buying Them

Endowment Policy: Questions to Ask Before Buying Them


If you are an impulsive buyer and spend a lot of money without any prior planning, an endowment plan is a right plan for you. The reason because an endowment plan offers a disciplined option for long-term savings. Getting an endowment plan is useful for those individuals who have a steady flow of income and might want a significant amount of money after a certain period.

Here are some things you should be considered before purchasing an endowment policy.

1.Salient Features of an Endowment policy

An endowment plan is a type of life insurance that offers life coverage along with an opportunity to save regularly over a specific period so that they can get a lump-sum amount on policy maturity. Consequently, one can use this maturity benefit to fulfil their several financial requirements like funding their children’s education, saving for retirement, buying a house, children’s marriage etc.

The plan not only offers maturity benefit but in case of an eventuality, the beneficiary of the policy also receives the full sum assured amount. Thus, we can describe the endowment plan as an insurance plan that allows you to save and offers a lump-sum maturity benefit.

The primary benefit that can be availed under endowment plan includes financial security of your family, tax exemption under section 80C and (10D) of the income tax act, goal-based savings, in case of any emergency option to avail loan facility against the policy.

2. Who Should Consider Buying an Endowment Policy?

As mentioned above, the endowment policy can be an effective savings option for those who tend to overspend without having any backup. They may need a large amount in hand, after a certain period in life (retirement) and an endowment policy helps them to inculcate a disciplined way of saving.

3. What are the Right Circumstances of buying an Endowment policy?

According to one’s financial obligations, everyone requires a risk-free assured investment option. Hence, endowment plans should be purchased to cover 3 areas, i.e. first to protect and ensure financial stability to the loved ones, second to achieve the financial goal, third build savings to achieve investment objectives over a long period.

However, while you are planning to purchase a regular premium policy, you should consider getting it only when you have a stable flow of income to pay the premiums on time. Endowment plans are helpful since this is a long-term plan and offers better returns over a long period.

4. Why Should You Buy an Endowment Plan?

One of the primary reasons why one should buy an endowment plan is that it provides an opportunity to save money in a disciplined way to fulfil future financial obligations. Also, an advantage to this policy is that the insured also gets life coverage along with a chance to build a healthy corpus for a financially stable future.

An endowment plan may offer you lower returns, but the investment associated risk is extremely low. Under the endowment plan, the policyholder can also get tax benefits on their returns. These salient features make endowment plan more favoured for risk-averse investors as it also provides maturity benefit other than the death benefit offered to the nominee of the policy in case of any eventuality.

To get the maximum benefits of the endowment plan, one should choose a simple and easy to understand endowment policy. If you consider all the above points while purchasing an Endowment Plan, you can definitely choose the most fitting plan for yourself.


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