Introduction

What comes to mind when you think of wealth generation or financial planning? To create financial safety in order to enjoy a stress-free retirement phase while also meeting other demands, goals, and aspirations. 

However, future uncertainties and reduced life expectancy impact your financial planning. As a result, there is an increased demand for life insurance coverage. It not only helps in the preparation of your financial objectives and ambitions, but it also serves as a blanket for your loved ones when you are gone. It’s a smart move to invest in life insurance coverage to secure long-term safety and stability.

However, there are many options out in the market which might attract the buyer. Endowment insurance provides a policyholder plan with a guaranteed sum insured amount, which helps build wealth in the long term and allows one to attain life’s financial goals.

Furthermore, the plan provides a death benefit to the policy’s beneficiary in the event of the untimely death of the life guaranteed within the policy’s term. Thus it acts as both an investment option and an insurance product.

What is an Endowment Plan?

To keep it brief, an endowment plan can be defined as a life insurance plan that covers the policyholder’s life and assists the insured in creating a corpus amount that is given as maturity amount when the policy ends. The policy can be utilized to achieve personal financial objectives and get personal life coverage.

The advantage of the endowment policy is that it provides full life coverage to the policyholder. That means if the insurer meets an untimely death, their family will get total compensation which will help the family in the time of crisis. These plans have higher premiums because they provide higher assured returns than standard insurance policies. Aside from the insurance benefits, an endowment plan serves as financial help for your long-term and short-term goals, which will aid the financial strategies that you’ve set. 

Types of Endowment Plans

There are different types of endowment plans that are available in the Indian market, and they are as follows:

Low-Cost Endowment Plans

• These plans have reduced premiums.
• These maturity amounts can be used for future expenses like mortgage, where you can use it to repay the loan or other goals; this type helps establish funds within a particular time frame.
• Yearly bonuses are attached to this plan, increasing the maturity amount at the policy end.

Unit Linked Endowment Plan

• Plan intended use is to leverage fixed-term savings, including life insurance.
• The portion of the premium paid goes to insurance, and the other part is in investment funds by the life insured.
• The ROI in this endowment plan is solely dependent on the market performance. 

Guaranteed Policy Endowment Plans

• The sum assured can be in the form of death or maturity benefits.
• The assured sum is paid to the policyholder upon reaching the maturity phase of the insurance or to the beneficiary if the policyholder meets with death.
• The plan’s bonuses are not guaranteed in this case. As a result, with this kind of endowment plan, one might earn guaranteed insurance payouts as well as a non-guaranteed bonus.

Complete Endowment Plans

• These endowment plans are also known as profit endowment plans.
• It guarantees sum assured to the life insured.
• This plan also has the provision of the death benefit.
• The life insured will receive the maturity bonus during policy tenure in complete endowment plans. Thus they receive a significantly higher sum assured after the maturity period.

Why Should I Consider Endowment Plans?

Besides the main principle of why you need an endowment plan in which your money grows to combat inflation while also providing you with life insurance, here are some additional reasons why endowment plans are wonderful plans to have in your financial plans:

Tax Benefits: In terms of tax benefits with endowment plans, you can take advantage of 2 provisions in the Income Tax Act, 1961:

• Section 80C: This section permits you to receive a refund for the premiums you paid to secure the tax advantages of an endowment savings plan. The life insured can claim a total reimbursement of up to Rs for the current year. 1,50,000.
• Section 10 (10D): The death benefit/sum guaranteed received under the endowment insurance plan is not deductible under section 10 (10D) (10D). The maturity benefit received by the life insured at the end of the endowment plan is likewise tax-free.

Easy Loan Approval Process: Loans are easier to obtain when you have financial tools like an endowment plan. However, you can borrow against your endowment insurance plan and make partial cash withdrawals in an emergency, as long as the lock-in term is 3 to 5 years, depending on the endowment plan. Furthermore, if you have an endowment plan, you do not need to put any collateral up against the loan.

Flexibility premium payments: Premiums can also be paid in one lump sum or monthly/quarterly or yearly installments. Furthermore, if you stop paying your premiums for the plan, it regulates the entire amount of your sum assured/maturity benefit to the total premium paid to date. Under such circumstances, the institution will notify the insurer and change the sum assured.

Optional riders to enhance life cover: There is no such thing as a perfect insurance plan. As a result, insurers provide additional riders as add-ons to your current package so you can have additional coverage for the aspects you require. It helps to make life insurance coverage more suited to the individual. Though riders come at an extra yet affordable fee, they provide your plan with more comprehensive protection in the future.

Induces Disciplined Savings: One advantage of having such plans is that it gives you the discipline where a part of your income is automatically invested. As the premiums can be paid at a monthly level as well, thus it makes it easier for anyone to save and let their financial plans stay on track.

Disadvantages of Endowment Plan

Apart from being a good insurance plan that serves what you need most of the time, like providing life cover and an investment corpus, some points might act as a barrier where you might want to skip this plan. But do keep in mind these are part of almost every plan, and now and then, you are expected to make some trade-offs to get a policy. 

• Higher policy premiums compared to other insurance plans in the market. 
• Lower investment yield. 
• Lower cash surrender value than premiums paid in the policy’s initial few years.

Top Endowment Plans in India

There are many endowment plans available to customers in almost every financial institution in India. However, we have compiled a list of India’s best three endowment plans that will serve as a valuable tool in your financial planning.

Here are the top 3 endowment plans in India:

1. ABSLI Vision Endowment Plus Plan
2. LIC New Endowment Plan
3. ABSLI Assured Savings Plan

ABSLI Vision Endowment Plus Plan

• This endowment plan provides secure savings and complete financial security over an extended period.
• The minimum sum assured is one lakh rupees.
• Provides policyholders with both death and maturity benefits
• Accidental Death Benefit rider is built-in and gives additional Guaranteed Amounts in the case of accidental death.

LIC New Endowment Plan

• The LIC endowment plan guarantees a minimum guaranteed payout of Rs.1 lakh.
• Provides death benefits equal to 105 % of gross premiums collected
• The death benefit on this insurance is more significant than the average amount guaranteed or ten times the annual premium.
• This plan can include accidental death and injury to riders at an extra cost.

ABSLI Assured Savings Plan

• It is referred to as a ‘Non-Linked Non-Participating’ Individual Life Insurance Savings Plan.
• Guaranteed benefits upon the death or maturity of the policy.
• This plan also includes mutual life insurance, making it a popular choice.
• Multiple riders are available, such as `accidental death benefit,’ ‘critical illness,’ ‘hospital care,’ and so on.

Conclusion

Every endowment or savings plan in India may provide something for a person interested in purchasing one for their needs.

However, before deciding, be sure you read the policy’s specifics. Endowment plans are essential for insurance and financial planning. Investing in an endowment plan is ideal for resisting inflation and achieving long-term goals such as higher education, marriage, retirement, and travel since they give low-risk life insurance protection and wealth building.