Endowment Plan Compare

Additional Useful Information

• Endowment Plans are available in different configurations. Here are some examples -
• Guaranteed Endowment Plan – Policyholder will receive a guaranteed return.
• Full/With Profit Endowment Plan – Policyholder will receive an assured sum which can increase based on bonuses announced by the company on the final payout.
• Low-Cost Endowment Plan – Can be used to pay off loans or write down mortgages.

• Specific terms of Endowment Plans will differ from company to company.

• Endowment Plans are suitable for individuals who have dependents in their family and want to make sure that they are financially secured in case of an untimely death while enjoying some regular income.

Returns *

• Cash Value / Bonuses – A part of the premium paid by the policyholder is used to generate returns in the form of cash value of the policy or bonuses. The cash value can be accessed by the policy holder if there is a need. Bonuses are paid out from time to time based on the specific terms.

• Death Benefit – This amount is received by the nominee upon the death of the policyholder.

• Maturity Benefit - If policyholders survive the policy duration, they will receive the maturity benefit.

• Surrender Value – This amount is received if the policyholder decides to surrender the policy before the maturity of the policy.

• Specific returns in terms of percentages are not possible to be defined due to the combination of insurance and investment. However, typical maturity benefits / returns from such Endowment Policies are in the range of 3% to 6.5% per annum currently.

Risk Level

• Endowment Plans are used to mitigate risk by guaranteeing a death benefit.

• Failure to pay premiums would terminate the insurance coverage and put the policyholder at risk.

• All insurance providers are regulated by the government. Therefore, any default risk is negligible.

Liquidity

• Endowment Plans are liquid. The policy can be surrendered at any time and the surrender value of the policy at that time will be received by the policyholder.

Interesting Facts

• Endowment plans have higher premiums as compared to term plans since term plans only provide life cover.

• Endowment Insurance policies provide the option to avail of personal loans against the cash value of the policy at competitive rates of interest.

• Endowment plans combine the lower coverage period of term life plans and the investment part of whole life plans.

Tax Implications

• The maturity benefit is tax free if the annual premium is less than 10% of the sum assured in the policy. Otherwise, the maturity benefit amount is to be added to the taxable income of the policyholder and income tax is to be paid according to the tax slabs.

• The death benefit which is the amount that the nominee of the policy receives in the event of the demise of the policyholder, is tax free.

• The premiums of the term plan can be used towards claiming the ₹1,50,000 tax deduction available under Section 80C of the income tax act.

• Any surrender value that exceeds the total amount of premiums paid is taxed according to the tax slab of the policyholder.

Where To Invest

• https://www.policybazaar.com/endowment-policy/

• https://licindia.in/endowment-plans