Endowment policy: a combination of insurance and investment

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Endowment policies are designed to provide insurance as well as to act as tools of investment.  Along with savings and insurance, tax saving is another benefit with these.  Risk coverage exists only for the tenure of the policy.  In case something happens to the nominee, the total insurance amount along with the accrued bonus is paid to the nominee and if the policy holder lives through the tenure, he will receive the intended benefits.  If you don’t like to take the whole amount at once, there are arrangements where you can receive it in installments.  These policies are available with a tenure of 7 to 30 years.

These are chiefly two types…

1.  Endowment policies that give additional benefits:  The policy holder will receive the total insurance amount along with bonus himself and the nomine will receive the same if something happens to the policy holder.

2.  Endowment policies that pay the insured amount:  Policy holder will receive the promised amount after maturity and nomine in case policy holder isn’t there.  There is no bonus in such policies and those who are interested only in insurance can take these.

Endowment policy for the whole life:

After policy maturity, if the policy holder lives through 100 years or dies, the total insurance amount is paid.  Along with other additional benefits (bonus) are paid.

Eligibility:

Infants of 30 days to elderly of 65 years are eligible.  There are no medical tests for those below 45 years of age.

Premium tenure:

There are different endowment policies that have a tenure of 7 years to 30 years.  Premium can be paid monthly, quarterly, half yearly or yearly.

Policy tenure:

Most companies have 15, 20, 25, 30 years as terms.

Insurance amount:

The policies start from a coverage of 50000.  There are different policies based on tenure, policy amounts.

Surrender value:

There is facility to surrender a policy after at least 3 years of premium payment.  The surrender value per time is clearly written on policy document.  These change from company to company and policy to policy.

Cooling off period:

If you don’t like the rules and regulations, the policy can be given back within 15 days of getting policy documents.  This is called cooling off period and should be known at the time of taking policy.  Premiums after deducting some charges are reimbursed.

Features of endowment policy:

·         Since it carries investment, the insurance amount is very less when compared to term policies.

·         Nominees are paid the insurance amount in case of death of policy holder.

·         Tax benefits per tax laws.

·         Medical tests may be necessary at the time of purchase based on age and health condition.

·         There are additional riders provide based on the needs of the customers.

·         Riders like accidental death benefit, accidental disability, family income and critical illness are available.

Not recommended for youth…

Endowment policies are not advisable for those who start investment as youth.  The premium paid here can be used for paying some part as term insurance and remaining in other investment tools.  This makes the insurance amount higher as well as get higher returns from investments.  Endowment policy is not good for those who are more in favor of investment because the whole of your premium is not made into investment and some part is used as insurance coverage.

There are endowment policies with single premium payment.  These types of policies have 12 to 30 years as term.  Those who don’t have any savings schemes and want tax exemption are using these policies.