An endowment policy is a life insurance policy which helps you in creating guaranteed savings for your financial goals. The plan has a death benefit and also a maturity benefit. In case of death of the insured during the term of the policy, a promised death benefit is paid. Moreover, if the insured survives till the end of the policy tenure, a promised maturity benefit would be paid. Thus, endowment insurance plans cover both death and maturity and help in creating savings.




How Does an Endowment Plan Work?

Endowment plans are similar to our regular insurance policies. They not only provide you with a life cover but also help you save on a regular basis. And once the policy matures with the given condition that the policyholder has survived the policy term, he/she will receive a lump sum amount. This amount can be utilized to meet financial needs like purchasing property, children’s education or retirement etc.


Salient features of endowment policy:

Here are some of the salient features which you can find in endowment policy –

1. An endowment plan is offered for longer tenures which can go up to 30 years.
2. There are whole life endowment plans too which allow coverage till 99 or 100 years of age.
3. An endowment policy does not invest in capital markets. As such, the policy promises guaranteed benefits. Only the bonus, if allowed, is non-guaranteed since it depends on the performance of the company.
4. Bonus is added under participating plans only if you pay the premiums as and when they are due.
5. There are optional riders under endowment insurance plans which help in enhancing the coverage.
6. Guaranteed additions or loyalty additions are added under many endowment plans.
7. There are regular premium, limited premium as well as single premium endowment plans. You can choose any plan as per your premium paying capacity.
8. You can avail policy loans under endowment plans. The loan is allowed against the surrender value of the plan.


Types of Endowment Policy

1. Full/With Profit Endowment- A basic sum assured is offered to the policy under a full endowment plan. The cover is guaranteed when the policy is purchased. In this policy, the insurer provides bonuses too. The final payout becomes larger due to bonuses. The insurer offers the bonus in the event of death or maturity.
2. Low-cost Endowment- People who want to save money for the future can purchase low-cost endowment policy. The plan helps in conserving finances to pay for loans and mortgages in the future. If the policyholder passes away during the term, then a minimum sum assured is paid to the beneficiary of the plan.
3. Unit Linked Endowment Plan- Policyholders can save their finances and get the benefit of life coverage with this plan. A unit linked endowment policy is a fixed term saving plan. The premiums are split into units under an investment scheme. The market drives the returns of this policy. Unit linked endowment plan is for investors who want high returns and have a high-risk appetite.
4. Non-profit Endowment policies- These offer guaranteed returns to the policyholder. A sum assured is paid to the policyholder on maturity or as the death benefit to the beneficiary.



Endowment plans are low risk savings oriented life insurance plans which let you create a secured corpus over the term of the policy. So, if you want guaranteed returns, buy an endowment policy and create funds for your financial goals.