Endowment Insurance PlansEndowment insurance plans provide life insurance cover for a specific period. The insured can get the sum assured plus any bonus or guaranteed additions that may accrue during the policy term.
Apnainsurance.com Research Bureau
20 Dec 2007
Endowment plans provide life insurance cover for a specified period. The important aspect is that on
maturity i.e. if the insured survives the term of the insurance, he/she
receives the sum assured at the end of the term.
A variation of the Endowment plan is the Endowment plan with Profit or Unit Linked Endowment plan with Profit.
In such plans, in the event of death of the insured during the term of the policy, the nominee receives the sum assured plus the bonus/participating profit/guaranteed additions, if any. The bonus or profit is paid for the number of years that the insured survives in the policy term. In case of unit-linked plans, the nominee receives the value of the investments or the sum assured, whichever is higher.
If the insured survives the term of the policy, she/he receives the sum assured plus bonus/participating profit/guaranteed additions, if any, for the entire term of the policy or the value of the investments.
The premium for endowment plans is higher in comparison to term plans. If one purchases plans with GA, the premium is higher than that for a regular endowment plan. Many companies offer an option in choosing the premium paying term.
Endowment plans are
advisable if the insured wants to purchase a product that provides both -
insurance cover and savings. Many people prefer to buy such policies for terms
that mature during their retirement period. Often, the maturity amount is
utilized to supplement the pension income.
However, there are other ways to create/supplement your retirement income. A substantial part of the premium paid for such plans is used by the insurance company to generate the bonus or profit paid to the insured or the nominee. If one chooses to impose self-discipline and invest regularly, other saving/investment avenues, such as mutual funds, offer higher returns. Click here to learn why your insurance plan is not a good investment avenue as well.
See also:FAQs on Life Insurance Basics
Life Insurance FAQs on Premiums
Life Insurance FAQs on Claims
Life Insurance FAQs on Insurance Company and Insurance Agent
Children's Life Insurance Policies
Money-back Life Insurance Plan
Term Life Insurance Plan
Whole Life Insurance Plans