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New Generation Endowments You Must Take a Look

By Vikas Chandra Das
21 July 2022, 11:46 AM
new generation endowments you must take a look

The primary function and interest of any life insurance company are to look after the financial needs of the insured. There are several types of schemes that are currently operating in the market. It depends on the demands and needs of the buyer to choose from the host of the policy plans what to choose. The general rule of any plan is that if the policyholder survives the term, there won’t be any returns. However, in the case of endowment plans, the insured is supposed to receive a certain percentage of guaranteed return after the term is over.

Features

  • Guaranteed Payout - After the completion of the term or the policyholder being diagnosed with a critical illness or on the death of the policyholder, the assured amount will be paid.
  • Profit - The endowment policy plans are available in both types—with profits or without profits.
  • Bonus - There is the provision for a bonus that is paid by the insurance company after the completion of the entire term.
  • Payment of Premium - There are multiple options available for the premium payment—single premium payment, quarterly payment, semi-annual payment, or annual payment option.

Benefits

  • The policyholder receives the insurance coverage throughout the entire term after the completion of which the insurer will pay a lumpsum amount. Often, it is observed that the amount received is higher than the expected return.
  • An endowment serves the dual purpose of a secured investment as well as a source of life coverage protection.
  • The endowment policy premium gets a tax redemption under Section 80C of the Indian Income Tax Act while the maturity proceeds are exempted under Section 10D of the same.
  • This is a guaranteed and safe investment idea, with no risk of loss.
  • Certain types of endowment plans extend the risk even beyond the said term depending on the application through special and additional rider facilities during certain exceptional cases.

New Generation Endowment Plans

  • Unit Linked Policies - These unit-linked endowment plans ensure investment benefits along with risk coverage. It depends on the needs and plannings of the policyholder how he/she chooses the funds for investments.
  • Full Endowment Policies - In these types of plans, the death benefit is supposed to be applicable from the date of the subscription of the policy. If there is the death of the policyholder, then the nominee will receive the assured sum along with the bonus on a pro-rata basis.
  • Simple Endowment Plans - This is a method of accumulating funds that will be paid to the recipient after the completion of the term.
  • Participating Plans - Here, the policyholder is liable to a certain percentage of the profit of the insurance company. This percentage of profit is paid as a bonus to the policyholder.
  • Non-participating Plans - Subscription to a non-participating plan means that the policyholder is not liable to any percentage of the profit of the company.
  • Whole Life Endowment Plan - This plan covers the insured for 100 years. The bonus amount is added to the assured policy sum and paid to the policyholder at the end of the term.

Selection

It depends on the financial plannings and needs of the policyholder, as to which variety of endowment plan to choose. The important determining factors for choosing the endowment plan depends on:

  • Individual financial needs
  • Age
  • Income
  • Risk-taking tendency

The total amount of premium paid in the case of an endowment plan is higher when compared to that of term insurance. The policy buyer can choose the modes, methods, and frequency of premium payment as per his/her convenience.

The bonus factor should also be taken into consideration. It is always advisable to choose the plan that offers the best bonus benefits, keeping all the other factors in mind. Customer service support is also bound to influence the decision of the buyer.

A simplistic endowment plan is the best to choose. In case of any ambiguity or confusion, the customer support team should be approached instantly to avoid any sort of misunderstanding.

The buyer must share all the relevant and necessary information with the insurer without omitting anything, otherwise, problems may arise at the time of claim settlement.

Riders

These are certainly added perks that the policyholders are eligible to avail under certain exceptional occurrences:

  • Critical or terminal illness
  • Premium waiver
  • Death by accident
  • Permanent or temporary disability
  • Dire need of cash
  • Accelerated assured amount

Who can Buy an Endowment Policy?

Endowment plans are perfectly suitable for people who love to pay and contribute the premiums at regular intervals. It becomes easier for people with a regular and steady source of income. This is a great, safe and secure way to build up a considerable amount of wealth. It may come in handy post-retirement, family ceremonies, children’s education, and the like.

One of the most striking features of the endowment plan is that it is risk-free. After the completion of the term, there will be a guaranteed return of the assured sum. In case of the death of the policyholder, the amount will be received by the nominee.

It is best to start investing at a young age so that the future remains safely covered in respect of finance. Moreover, early age will ensure lesser premium payment. Once the amount of premium is fixed, it will remain constant throughout the entire term of the policy. Therefore, beginning at an early age is the key to reap the best fruits during maturity.

In the case of term insurance, the insurance coverage is considerably higher than that of endowment plans. If the policyholder dies the assured amount is received by the nominee. But, if the policyholder survives the entire term, there is no benefit.

But in the case of an endowment policy, the policyholder is liable to receive the benefit of a lumpsum amount after the completion of the term. If the policyholder is unable to survive the term, then the assured amount will be paid to the nominee. Apart from covering the risk factors, endowment plans guarantee an assured return too. Therefore, this becomes a dependable source of income with added perks and benefits too.