A life insurance policy is essential to any arsenal against the unfortunate turns that life can take. When you buy a life insurance policy, you insure the future of your loved ones in case an unpredictable event strikes you. However, one must know that there are various other benefits to life insurance other than a life cover. You can avail these benefits by buying the appropriate type of life insurance. An endowment insurance policy is a suitable option for those who want the security of a life cover and the chance to save and build a lump sum corpus. Thanks to this dual benefit, an endowment policy is ideal if you want to provide the ultimate protection to your loved ones. Let’s learn more about the same.
How does an endowment policy work?
When you buy a traditional life insurance plan, the entirety of your premium is directed towards building your life cover. In an endowment policy, however, the premium is utilised for two purposes – to build the life cover as well as to save a lump sum amount for maturity. When your policy reaches its maturity, you receive this lump sum amount. If, unfortunately, you pass away during the tenure of the plan, your family receives the sum assured amount.
Thus, this kind of plan acts as a double shield, providing you with value in both situations. If you want to better comprehend the amount you should invest in an endowment plan to get the right kind of protection, you should use a life insurance calculator.
How endowment insurance helps protect your family
- Guaranteed life cover
If you are a primary earning member of your family, then you may be often wondering about what could happen to your family in case you are no longer around. Having an endowment life insurance policy ensures that their financial well-being is taken care of, even in your absence. If the demise of the policyholder occurs during the tenure of the plan, the beneficiaries chosen by the policyholder receive the sum assured amount. This amount helps them continue to live a life of financial dignity, without worries of any outstanding debts or lack of finances.
- Additional coverage with riders
One of the main things to consider before buying an endowment plan is the riders it comes along with. Some essential riders that can augment your coverage are critical illness rider, waiver of premium rider, accidental permanent disability/death rider, and so on. These riders provide great financial help in times of emergencies.
- Maturity benefit
Aside from the peace of mind that comes with a life cover, one also needs to pursue wealth creation for the continual well-being of their family. Saving in a disciplined manner for a long period of time can help you achieve this. With the maturity benefit aspect of an endowment policy, you get to tick this off your financial to-do list. In some endowment plans, the maturity benefit is pre-defined. So, once you patiently complete the maturity of the policy, you receive this accumulated savings fund.
You can use this amount to fulfil several goals in life, such as providing for your children’s education, taking a foreign trip, buying an annuity plan for your retirement, and so on. It can also be used to build an emergency fund for your family. If a medical emergency comes up, you have enough funds at your disposal to take care of it.
- Bonus component
If you opt for a participating plan, then you also get the added benefit of a bonus. A participating plan is one in which the policyholder gets to enjoy the profits of the policy. The bonus is usually issued every year and is mostly paid out at the end of the policy term. In the event of the policyholder’s demise, the beneficiaries receive the accumulated bonus along with the sum assured. Checking the bonus frequency and policy profits are some important things to consider before buying an endowment plan.
This bonus can prove as a financial shield or cushion for your family and ensure they have the funds to pursue their dreams.
Financial decisions should be taken with caution and preparation. Hence, before you sign the proposal policy endowment plan, do read the policy wordings thoroughly. Ensure to use tools, such as the life insurance calculator, to make a well-informed decision.