Until the onslaught of the private insurance companies in India, Endowment Policies were very popular and were on the go but as of lately it seem that they have been taking over by ULIPS.
Latest statistics show that around 90% of the ULIPS were sold by the private insurance companies but endowment policies still form a major chunk of insurance policy especially the Life Insurance Corporation’s sales. There are certain things that a person should know about the endowment plans.
If you take An Endowment policy, it is basically a contract that provides a life insurance cover for paying a lump sum amount on maturity or after death. These policy is a typical unit-linked or traditional with- profits.
Getting two products for the Price of one
These policies are an attractive combination of life insurance with a saving program. Such a policy has dual benefits of investments and insurance. In addition to it an endowment policy declares a bonus each year i.e. the money invested generates a return. Though the bonus so declared does not become payable immediately, it accumulates and is payable only when the term of the policy expires or in the event of the death of a policy holder. Since the bonus is not compounded the returns are generally low.
Lower Risks
Endowment Policies are free from investment risks and Interest rate risks. The only problem one might face in such a type of policy is lower return as the risk involved is lower so are the returns.
Suitability
Endowment plans are suitable for people of all the age groups who wish to protect their families from financial crisis that may take place after their demise. Endowment policy also has a disability plan according to which if a policy holder becomes permanently disabled before reaching the age of 70 and the policy was in full force at that time then he need not pay further premiums and the policy will remain in force.
Kinds of Endowments Available
There are various kinds of Endowment policy one can get in the Insurance Market for example, Traditional with Profits Endowments, Unit-linked Endowments, Full Endowments, Low Cost Endowments, Traded Endowments, Modified Endowments.
In a Nutshell
Endowments are the participating non-linked plans that will offer you an attractive combination of safety cover and saving features. This dual attribute of the policy safeguards the financial interests of the deceased policy holder’s family members and any time that is in the event of the death of the policy holder before maturity and in the case of a surviving policy holder it guarantees good lump sum at the time of maturity of the policy term.
This policy also takes due care of the liquidity needs through its loan facility. The benefits that the endowment policies provide are many such as Death Benefits, Maturity Benefits, additional bonuses, and accidental and disability benefits, wherein the premiums for the portion of the sum assured under the policy shall be waived off.