Endowment Life Insurance

An endowment insurance plan is a type of life insurance that combines life insurance coverage with a savings component. This means that you pay premiums to the insurance company over a set period, and in return, the company promises to pay out a lump sum of money if you die during the policy term or if you live to the end of the term.   
 

Types of Endowment plan: 
 
With-profit plans: These plans pay out bonuses in addition to the sum assured. The amount of the bonus is determined by the insurance company and is not guaranteed. 

Without-profit plans: These plans only pay out the sum assured. They are generally cheaper than with-profit plans, but they offer no potential for additional growth. 

Benefits of Endowment plan: 

• Dual benefit: Endowment plans offer a dual benefit of life insurance and savings.  

• Guaranteed returns: Unlike market-linked investments, endowment plans offer guaranteed returns on your investment.  

• Discipline and commitment: Endowment plans inculcate the habit of regular savings.  

• Loan facility: Most endowment plans offer loan facilities against the surrender value of the policy.  

• Riders: You can add riders to your endowment plan to get additional benefits, such as critical illness cover, accidental death cover, and waiver of premium benefit. 

• Child education planning: Endowment plans can be a good way to save for your child's education. 

• Retirement planning: Endowment plans can also be a good way to save for your retirement.  
   

Difference of Endowment and Term life plan: 
 
1.Purpose. 

• Endowment Plan: Combines life insurance with a savings component. You receive a guaranteed sum assured (maturity benefit) if you survive the policy term or a payout to your beneficiaries if you pass away during the term.  

• Term Life Plan: Purely provides life insurance coverage. If you pass away during the policy term, your beneficiaries receive the sum assured, but you get no payout if you outlive the term.  

2.Premiums: 

• Endowment Plan: Premiums are typically higher due to the dual benefit of insurance and savings. 

• Term Life Plan: Premiums are significantly lower as they only cover the death benefit. 

3.Returns: 

• Endowment Plan: Offers guaranteed returns, usually lower than market-linked investments but provide stability. 

• Term Life Plan: No returns or investment component. You only pay for the life cover. 

4.Maturity Benefit: 

• Endowment Plan: You receive the sum assured upon policy maturity, along with any accumulated bonuses. 

• Term Life Plan: No maturity benefit if you outlive the policy term. 

5.Choosing the Right Plan: 

• Endowment Plan: Ideal if you seek life cover and want to build wealth gradually over the long term. Suitable for retirement planning, child education funding, or any other long-term goals. 

• Term Life Plan: Best for providing substantial financial protection to your dependents at an affordable cost. Suitable for young earners, those with dependents, or anyone needing high life cover without an investment component. 

Posted By: Aasma Bhusal