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Endowment Plans

Term plan
was a pure “RISK PRODUCT”. Endowment plans are an “INVESTMENT
PRODUCT”. There are two benefits that you enjoy with such a plan , one is
a maturity benefit that is paid to the policy holder if he survives the term,
if he does not then the beneficiary gets the death benefit and also the
maturity benefit at the time of maturity. There are two pay out’s happening in
case of death happens.

These
products became an instant success as they provided the life cover with death
and maturity benefits. Markets are loaded with variants of the same category as
they seem more investor friendly as opposed to a normal term plan.

Let us
try and understand how you could pick the right product. Here are a few things
you should know.

Premiums on a higher side

There are
two benefits associated with such plans and this is more of an investment
product, hence the premiums on such plans are higher as compared to a term
plan. If you are looking for a risk cover for your family, then I suggest you
look at a term plan as it costs less, if you need an investment component, then
it will cost you more.

Maturity benefit

The sum
assured plus bonuses declared by the insurance company during the term of the
policy, accumulate to become the maturity benefit which will be paid to the policy
holder if he survives the term

Bonuses available on endowment
plans

These are of two types:

  • Re visionary 
    bonus
    – Bonus 
    that is payable at the time of maturity but gets accumulated yearly based on the performance of the insurer. This is also called a regular bonus.
  • Terminal
        bonus

        This is a kind of loyalty bonus paid by the insurer at the time of
        maturity.

Compounding of bonus

No, the
bonus accumulated and paid at maturity does not get compounded.

Types of endowment plans

Currently
there are following variants available:

  • Unit linked endowment plan – In such plans, the benefits are paid out in
        units, the number of units you own depends on the premium being paid and
        the current market price of the underlying asset. You can opt the
        underlying asset by choosing a combination of debt and equity based on
        your risk appetite. This works more like an insurance packaged with a mutual fund.
  • Full endowment policy – This is a with profit endowment policy,
        where the sum assured and death benefit are equal at the beginning.
        Assuming growth through bonus being paid, the final pay-out is much higher
        than the sum assured.

Change in beneficiary

In an
endowment plan
, there is provision for the same. This needs to be done before
the maturity of the plan and the same has to be intimated through a form –
“Application for change in policy contract”. These forms are available with all
service providers.

Money back plan

This is a
unique endowment plan. The idea here is to help you get funds when you need it
the most, you need not wait for the maturity of the policy. The maturity
benefit is paid back to you in regular intervals after a few years from the
commencement of the policy. The death benefit clause remains the same and is
paid to the beneficiary if you fail to survive the term.

These
policies are considered to be the best and are available across all service
providers.

Submission of medical report

Depends,
your age at entry, sum assured, financial background, personal and family
history are all factors that could decide this.

Loan on insurance

Endowment
plans can be used as collateral for taking a home loan as there is an assured
benefit. You can do this only after the completion of three years of
commencement of the policy.

Tax benefits

All
premiums paid are exempted up to a maximum of Rs. 1, 50,000 under section 80©
of the income tax act. Claims received by beneficiaries and bonus received by
the policy holder are exempted under section 10 (10) D of the IT act.

For
More Details on Endowment Plan Give Us a

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Call On 022-62116588
to know which option could be better for you!!

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