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Things To Know Before Getting An Endowment Policy

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By Author: Shaheen Shaikh
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If you are a spontaneous buyer and spend a lot of money without any previous planning, an endowment policy is the best plan for you. That is because an endowment plan gives a disciplined route for long-term savings. Purchasing an endowment policy is advantageous for those people who have a steady income flow and might need a substantial amount of money after a certain period.

However, some things should be studied before purchasing an endowment plan.

Notable Features of an Endowment Plan

An endowment policy is a life insurance plan that offers life coverage along with a chance to save regularly over a particular period so that they can receive a lump-sum amount on the maturity of the policy.
Afterwards, one can use this maturity benefit to fulfil their diverse financial needs like funding their children’s education, accumulating for retirement, buying a new house, children’s marriage etc.

The primary benefit that can be availed under the endowment plan involves financial security of the dependants, tax exemption under section 80C and (10D) of the income tax act, goal-based savings.

Who Should Consider Buying an Endowment Policy?

As mentioned above, the endowment policy can be a significant savings option for those who tend to overspend without keeping any financial backup. They may require a considerable amount in hand, after a certain period in life (particularly after retirement) and an endowment policy helps them to develop a habit of saving.

When should you buy an Endowment Plan?

According to one’s financial obligations, every individual needs a risk-free assured investment. Therefore, endowment plans should be purchased to secure three areas, i.e. first to protect and ensure financial security to the loved ones, second to reach the financial aim, third build savings to accomplish investment objectives over a long tenure.
Nevertheless, while you are preparing to buy a conventional premium plan, you should consider purchasing it only when you have a stable flow of income to pay the premiums. Endowment plans are helpful since this is a long term plan and gives better returns over a long period.

Why Should You Buy an Endowment Plan?

One of the major reasons why you should buy an endowment plan is that it gives you a chance to save money in a disciplined way to fulfil future financial demands. Furthermore, an advantage to this policy is that the insured also gets a life cover along with a chance to build a healthy corpus for a financially guarded future.

An endowment policy may give you lower returns, but the associated risk is very low in an endowment plan. With an endowment plan, the policyholder can also get tax benefits on the returns. These characteristics make endowment plan more favoured for risk-averse investors as it also offers maturity benefit apart from death benefit provided to the nominee of the plan in case of any mishap.

What checklist to follow while buying Endowment Policy?
As you can get more extensive options of endowment plans accessible in the market, choosing an appropriate policy for yourself depends on various factors including individual needs, income, life stage, risk appetite etc. If you are considering investing a considerable amount in an endowment policy, never forget to analyse the quotes beforehand. By checking the premium rates of different endowment plans, you will be able to choose the right plan for you.

To avail the maximum advantages of the plan, one should choose a simple and easy to follow endowment plan. If you factor in all the above suggestions while purchasing an Endowment Plan, you can surely select the most fitting plan for yourself.

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