A unique life insurance contract designed in order to pay a huge amount to the policyholder, after a specific term/death of an individual is known as the endowment plan.
Requirement of Endowment Plans:
Endowment plan is a major plan offering various benefits to the policyholder like the periodic payouts and the insurance coverage.
Features of The Endowment Plans:
Some of the unique features of the endowment plans are given below as follows:
- Low Risk Investments
- Increase in the returns
- Helps to earn additional bonuses
Variety of Endowment Plans:
Many types of Endowment plans have entered the market. Types of the Endowment plans are given below as follows:
Traditional With Profit Endowments:
A unique plan where in assured amount is paid to the nominee upon the death of the policyholder. Assured sum, along with profits, will be offered as per policy. Furthermore, if the policyholder is alive, assured sum is offered to the individual along with the bonuses.
Unit Linked Endowment(ULIP): As per this policy, premium paid is to offer life cover and remaining part will be invested in equity and debt related schemes. Policyholder has got option to select various kinds of funds, based on their ability.
Traditional With Non-Profit Endowments:
In this plan, the sum assured will be paid to the nominee, after the death of the insured person. Furthermore, one will not get any profit with this plan.
Low Cost Endowment: An interesting plan, where in the growth rate of your money will touch the targeted amount and the guaranteed life insurance. Low cost endowment plan can be used to clear mortgage. Policyholders will go and increase the premium amount to clear mortgage.
Traded Endowments: Under this scenario, a policyholder can cancel the policy and obtain the payments. It is known as “Surrender Value” determined by the insurance company. Traded endowments allow the policyholder to transfer ownership to the secondary investor.
Advantages of Endowment Plans:
Some of the advantages of the endowment plans are given below as follows:
- It covers risk for a particular period
- Additional bonus accumulated are paid along with the sum assured
- Investors can add extra benefits like the accidental riders, critical illness, medical expenses and others
- Good for the investor, paying premium in short period and enjoy benefits in the longer run
- Comes with dual benefits like insurance and the investments
Disadvantages of Endowment Plans:
Some of the minuses of the Endowment plans are:
- Premium is very high
- Surrender value is very less than premium paid
- Returns/Yield will be very less
- Lack of flexibility
- Fixed deposits and National Savings Certificate provide better options compared to Endowment Plans.
I would always advise people to go in for the endowment policy, as a secured financial investment.
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