Is Endowment Plan a Good Investment?

by Abhishek K. Digital Business Executive

The rising cost of living is inevitable and once coupled with a stagnant inflow of money, the financial future of a family begins looking shaky. No matter the circumstance, essentials such as children's education, household expenses, groceries, etc. are bills one needs to attend to. Add to it several unrealized dreams and insufficient funds- an unsettled feeling sets in. Amid these worries is perhaps the biggest one of them all is what will happen to your family in your absence? How or can they sustain when there is less money, to begin with? Not impossible.

Enter endowment plan.

An endowment policy is a type of life insurance policy that covers the life of the insured while helping the policyholder save regularly over a specific period. This helps the individual obtain a lump sum amount on the policy maturity in the event of him/her surviving the policy term. The life insurance endowment plan pays the full sum assured to the beneficiary stated in case the person insured dies during the policy term.

Who can invest in an endowment plan? This plan encourages the policyholder to save money regularly to obtain a large corpus of money in the future along with the prospect of capital growth in the long term. People with a regular flow of income and those who foresee the need for a lump sum saving after a while can be ideal investors.

What are the benefits of an endowment plan, Can one build his/her savings with it?

Even if returns are lower, endowment policies are mostly risk-free concerning guaranteed sum assured. One can sign up, pay premiums as and when it is due, and not worry about money invested.
Endowment plans or policies provide insurance cover during the policy term and hence there is no need to take on another life insurance policy for the individual.
The lump-sum payout on maturity is a substantial chunk of savings that will be particularly useful for planned expenses in the household.
Usually, the individual is entitled to obtain a tax exemption on premium payments, maturity, and final payouts under Section 80C and Section 10(10D) of the Income Tax Act, 1961.
Many service providers today have included the option of adding riders to the endowment plan which means one can enhance the policy cover. Additional riders can include critical illnesses, waiver of premium, family income benefit, accidental death benefit, and accidental permanent total / partial disability benefit. Now, this is certainly an indirect saving considering additional clauses covered, for a marginally increased premium payment.
Most Insurance companies declare the bonuses-extra amount of money that gets added to the final proceeds, distributed to a policyholder by the insurer.

With an endowment plan, the policyholder is not just investing money for the sake of returns and accumulating a valuable corpus of money that his family can use in his absence- he is also insuring his life. The endowment plan results in a large savings fund that can be useful for a variety of personal purposes- most importantly the feeling of security that it creates for an individual is priceless.