Why should you get an Endowment Policy?

There are a lot of insurance and tax saving instruments available in the market today. Some cater mainly to higher returns while others to higher coverage by compromising on the returns. Endowment policies strike a balance between these two. Unlike in a Term Insurance, which has minimal benefits if the policy holder outlives the policy duration, an endowment plan, in addition to providing life cover, guarantees a lump-sum amount to the policy holder if he is lucky enough to survive the policy term. Typically, endowment plans are costlier than term insurance plans. When compared to unit linked insurance plans, endowment plans provide lesser returns. Endowment plans are generally meant for people who have a regular income and want to save for their future goals like children’s education, retirement benefits or may be for buying a house.

The regular nature of payment disciplines and streamlines the monthly expenditure in a middle-class family. Thus, these policies not only help families to secure their future but also allow them to save for the same. Apart from this, there are other benefits to such policies too. As in case of other insurance policies, tax benefits are available under Section 80C and 10(10D) of the Income Tax Act, 1961. Loans can also be availed against these policies in case of emergencies. Like Term Insurance plans, endowment plans also come with additional riders like disability, critical illness, waiver of premium etc. Insurance companies offer additional bonuses on such policies which adds up on the value guaranteed to the customer. Endowment policies can be used as a disciplined means to save for long term goals. Compared to unit linked plans whose returns depend on the vagaries of the market forces, endowment plans offer a low risk investment route.

Which policy is the best in 2018?

There are a lot of endowment policies available in the market today. Here are a few of the top performing ones:

Reliance Life Insurance Super Endowment Policy

  • Maximum age of individual on entry is 60 years.
  • Flexibility to choose policy terms between 14-20 years.
  • Minimum sum assured is a measly 10,000 INR.
  • Premium paying term between 7-10 years.

Kotak Classic Endowment Plan

  • Provides coverage till the age of 75 years of the person insured.
  • Bonuses starting from the first year can be availed annually.
  • Provides a varied range of term options.
  • Protection can be enhanced by availing various riders.

Kotak Premier Endowment Plan

  • In the first five years of the policy, 5{9493a24412882c5f27dc795bd892c8c6609feb6b09e049a59793bb3b3fc50f67} of the basic Sum Assured is added as Guaranteed Additions to the total value.
  • From the sixth-year bonuses are added to the policy.
  • Minimum sum assured of 61,317 INR.
  • Various premium payment options to choose from.

SBI Life Endowment Policy

  • Provides coverage till the age of 60 years of the person insured.
  • Minimum sum assured is 75,000 INR.
  • A single premium tenure is allowed by this policy.
  • Maximum policy tenure of 30 years.

LIC New Endowment Plan

  • Provides coverage till the age of 75 years of the person insured.
  • Minimum sum assured in 100,000 INR.
  • Provides a death benefit of not less than 105{9493a24412882c5f27dc795bd892c8c6609feb6b09e049a59793bb3b3fc50f67} of the premiums already paid.
  • Additional riders are available for accidental death and disability.
  • Maximum policy tenure is 35 years.

IDBI Federal Endowment Policy

  • Provides coverage till the age of 75 years of the person insured.
  • Minimum sum assured is 10,000 INR.
  • Premium paying term of 12-30 years.
  • Policy term is the sum of the premium paying term and the payout period.

 

Steps to get the right endowment policy

Before you get too excited and jump to buy an endowment policy you should know the right steps to buy one including the research that needs to be done. As mentioned above, there are numerous policies available in the market. Here are the steps you should follow to choose the right endowment policy:

  • Start planning early: Starting investments at an early age helps to buy a policy with a longer maturity duration. This compounds the returns and thus ensures that the money you get at the end is considerably higher. Also, starting early can help you achieve your goals, like buying a house or any other property, early in life.
  • Check the premium and bonus rate – Since there are various service providers, due care needs to be taken while choosing the right policy. The policy premium and the bonus rates of different policies need to be compared beforehand. This assumes more importance given the fact that it is a long-term investment.
  • Riders – Riders play an important role in selecting the right plan. Choose a plan that suits your needs.
  • Consider payment flexibility – Salaried individuals can go for regular payment options and people with irregular income can choose a one-time payment option.

As they say, the devil lies in the details. So, choose an endowment plan by comparing it online on Coverfox, which is simple to understand and easy to settle.