What is Endowment Policy?
Endowment policies cover the risk for a specified period at the end of which the sum assured is paid back to the policyholder along with all the bonus accumulated during the term of the policy. It is this feature - the payment of the endowment to the policyholder upon the completion of the policy’s term - which rightly accounts for the popularity of endowment policies.
Typically, one’s responsibility for the financial protection of the family reduces significantly once the children are grown up and independently settled. The focus then shifts to managing a smaller family - perhaps only oneself and one’s spouse - after retirement. This is where the endowment - the original sum assured and the accumulated bonus - received back comes handy. You can either use the endowment amount for buying an annuity policy to generate a monthly pension for the whole life, or put it in any other suitable investment of your choice. This is the major benefit of an endowment policy over a whole life one.
How is it beneficial to me?
As compared to whole life policies, the premium rates for endowment policies are higher and the bonus rates lower.
The cost of an endowment policy is, typically, double that of a whole life one. On the plus side, these polices offer you an endowment - representing a return on your premium payments payable to you in your own lifetime when the policy comes to an end.
Premium payment term
Premium on endowment policies are usually payable for the full term of the endowment policy unless, of course, death were to take place earlier.
Who Should buy this Plan?
Overall, endowment policies are the most suitable of all insurance plans for covering the risks to a family breadwinner’s life. Not only do these policies provide financial risk cover for the family, were the policy holder to die prematurely but the insurance amount is also repaid once this risk is over. The endowment amount can then be used for meeting major expenditures such as children’s education and marriage, etc.
Alternately, the endowment sum is available for a suitable investment geared to providing an income for the remainder of one’s own life. These type of plans are particularly suitable to those who other than having a risk cover are also interested in a savings component simultaneously.