An endowment policy is basically a life insurance policy. You not only save regularly over a duration of time but also get a life cover and a lump sum amount on the maturity of the endowment policy. You may use these funds for your retirement, child’s education, marriage or to buy a new dream home.
In brief, if you really want to financially protect your loved ones, fulfil your goals in life and avail tax benefits under section 80C and 10(10D) of the Income Tax Act, then you should definitely go for an endowment life insurance policy.
In case of any financial emergency, you can also avail a loan facility against your endowment policy for immediate liquidity needs.
Understanding Endowment Policy
An endowment policy is a type of life insurance contract, which, apart from providing the normal life insurance benefits, also helps the life insured save money over a specific period of time. Through this, you can get a lump sum benefit at the time of maturity of the policy. The best part of this policy is that you get an assured amount on maturity in your old age, when you don’t have an income, to live a comfortable and hassle-free life.
An endowment plan is a safe investment option as it comes with a maturity plus death benefit. At the time of the maturity of the policy, the sum assured is given to the policyholder along with guaranteed additions or bonus which gets accumulated over time. The guaranteed additions that accumulate depend on the tenure of the policy chosen by the insured. Apart from the maturity amount, the policy also has a death benefit which means that in the times of the unexpected death of the policyholder, the nominee will get the sum assured along with the guaranteed accumulations.
To get the maximum benefits out of your policy, you should aim for a simple and easy-to-understand policy that does not put an excessive burden on your pockets. You should understand your complete needs and requirements and only then go for the suitable life insurance endowment plan. Giving proper considerations to the above factors can help you get the ideal endowment plan for yourself.
Other Factors That Decide Endowment Policy Premiums
Age plays a vital role in calculating the premium of the endowment plan. The younger you are, the lower is the risk of dying or contracting any life-time diseases and hence, the lower will be the premium.
- Health history
If your family has a history of chronic diseases, then the insurance company will take you as a risky candidate and hence will charge you extra basis the risk factor.
- Current medical condition
Your current health plays an important role in deciding the premium. It can give an indication of risk factor to the insurance company, and basis that your premium will be calculated.
Occupation again plays a major role in deciding your life insurance premium. If you are involved in a dangerous occupation which exposes your life to risky conditions, then you will have to pay a high price for your life insurance policy. Some occupations are also exempted from getting life insurance plans due to high potential of accidental death.
- Life habits
Smoking and drinking are bad habits that expose an individual to life-threating diseases. Having such habits play a role in deciding the premium of an endowment policy. Due to this, the insurance company will charge you higher premium basis the extra risk due to the unhealthy habits.
- Sum assured
Endowment policies may be available for different sum assured. Depending on the higher or lower sum assured, the premium calculation will be done. The larger the amount of death benefit, the higher will be premium.
Gender also plays a role in deciding the life insurance premium. According to studies, it is believed that women tend to live longer than men, hence the risk associated with women is lower and hence the premium calculation for women is lower.
- Mode of buying a policy
If you are getting a policy through an agent, then you will have to pay a hefty agent commission. This will have a huge impact on the overall premium of the policy. Whereas, if you buy the policy online, then you will escape the agent commission and pay lower price resulting in lower overall premium. Also, you can compare policies on web aggregator websites like Coverfox.com and save yourself a lot of money.
Hope the above pointers were helpful and by now you have got a good understanding of an endowment policy.