An endowment policy is a great financial instrument that facilitates wealth creation as well as extends the facilities of a life insurance plan. The added benefits that this life insurance plan extends have made it an ideal choice among various individuals.
Further, several insurance companies have launched new generation endowment insurance plans that efficiently cover various financial risks. The following sections talk about why endowment policies may be worth a look for individuals.
Benefits of new generation endowment policies
An endowment policy brings in various benefits, such as –
- The policyholder receives a lump sum amount in addition to bonuses on the policy's maturity. Additionally, the received corpus is often higher than the expected return.
- An endowment plan provides dual benefits of a life insurance cover and a long-term investment plan.
- Policyholders are eligible to obtain tax redemption under Section 80C of the Income Tax Act for the premium payments. At the same time, the proceeds from maturity are subject to tax exemption under Section 10D of the Income Tax Act.
- This investment instrument does not feature any notable risk. It provides guaranteed returns on policy maturity.
- Certain endowment policies extend the risk coverage by adding rider facilities.
Types of new generation endowment policies
To understand endowment policy meaning one needs to know the types of new endowment policies that insurance companies offer. Find them below –
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Unit linked policies
Unit linked life insurance plans extend risk coverage as well as investment benefits. The choice of funds depends on a policyholder's investment objective and risk appetite. They are also called ULIPs, and investors can switch their invested sum between debt and equity funds.
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Full endowment policies
In full endowment plans, the death benefit becomes applicable from the policy purchase date. If the policyholder dies, his/her nominees receive the sum assured along with applicable bonuses on a pro-rate basis.
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Simple endowment policies
The primary aim of a simple endowment plan is to accumulate funds on a periodical basis and provide maturity benefit to the policyholder at the end of a policy term.
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Non-participating plans
If a policyholder purchases a non-participating endowment plan, it indicates that he/she will not participate in the insurance company's profits.
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Participating plans
As opposed to non-participating plans, policyholders benefit from participating in the insurance company's profits in a participating plan. Thus, a policyholder receives a small percentage of bonuses from the Whole life endowment plans
Choosing an ideal endowment plan
In this regard, one must make a purchase decision based on these factors:
<a a=" rel=" "nofollow""="">Furthermore, individuals can consider visiting the apps and websites of aggregators to compare different endowment plans. One can also route their policy purchase through this platform.
Evidently, an endowment policy is a great option to create substantial wealth and receive the advantages of a life insurance plan. It is an ideal insurance plan for individuals looking to generate a massive corpus for their long-term financial needs.
