Endowment Plans in India
An endowment plan works the same way, but has an additional clause that states that a lump sum payment will be made to the insurance holder if he or she survives till the end of a specified period known as the 'maturity period', 'endowment policy term' or 'survival term'.
A traditional insurance plan pays out a lump sum assured in the event of the death of the policyholder. The beneficiaries/dependents/nominees of the life insured receive a benefit (called a death benefit) if the worst should come to pass for the insurance holder.
There are variations to the pay out clause in endowment policies - some companies have a lump sum pay out on the detection of a critical illness, or other life-changing events.
Key Features of Endowment Policies:
- Sum assured in an endowment policy is payable either on survival to the term or on death occurring within the term.
- Endowment policies are available as 'With Profit' and 'Without Profit' plans.
- Under Endowment policies, a bonus for the full term is payable on the date of maturity or in the event of death, whichever is earlier.
- Premiums for endowment policies can be limited to a shorter term or can be paid as a single premium.
- Premiums cease on death or on the expiry of the term, whichever is earlier.
Benefits of Endowment Policies:
Endowment policies carry plenty of benefits, a few of which are listed below:
- An endowment policy will provide insurance coverage during the policy term.
- An endowment policy will pay out a sizeable lump sum amount at the end of the policy term i.e. once the policy has matured.
- An endowment policy works to serve a dual purpose. Not only does it work as an insurance policy but it also serves as a long-term investment offering decent returns.
- Endowment policies come with tax benefits.
- In terms of investing, endowment policies are relatively safer than other types of investments and offer returns which are close to those offered by mutual funds.
- Endowment policies enable long-term savings.
- With an endowment policy, you can be assured of receiving a considerable amount upon maturity.
- Most will extend insurance coverage and the promise of benefits even after the maturity date, in some cases up to a time when the life insured attains the age of 100.
- Policyholders have the option of choose for additional riders which provide cover for specific illnesses, critical illnesses, disabilities, etc.
How Do Endowment Policies Work?
Endowment policies are not very different from regular insurance policies. These policies, like insurance policies, not only provide cover to the life insured, but also help them save regularly over a specific period of time. Once the policy has matured and given that the policyholder has survived the policy term, they will receive a lump sum maturity amount which can be utilized for meeting financial needs like purchasing property, children's education, organizing a wedding or preparing for one's retirement.
Are Endowment Plans for You?
The decision to take on an endowment plan must be well thought out and its benefits, returns on investment, etc. must be compared against those of similar investments.
If you are a healthy individual in need of life insurance coverage and an investment that helps you save on tax in addition to giving you huge returns, you may choose to opt for a combination of financial products, or opt for a single endowment plan which does the same thing.
You may purchase a and invest in a separate mutual fund, etc. and expose yourself to the risks involved in a mutual fund investment. It's quite ideal for those with a high-risk appetite. For those who find that their life savings are too valuable to leave to chance, an endowment life insurance policy is ideal.
An endowment policy is far less risky than a mutual fund investment, and also has ULIP options that invest in various equity and debt schemes. In addition to being a tax-saving investment with guaranteed returns at the end of the term, it also provides comprehensive life insurance cover - which is a win-win situation for the investor (and his dependents).
There are arguments against endowment plans because the returns on investment are not as high as those offered by a mutual fund, equity and debt-related investments of similar amounts for similar tenures. Purchasing two separate financial products - one for a life insurance policy and one for a product directed to give you returns on investment will pay off better with a higher percentage of returns. That being said, it must be noted that while there are better options for returns on investments, endowment policies are first and foremost insurance policies. They just have the added benefit of giving you a return on the premium you've invested - on plan maturity.
Consider your risk appetite and requirement for life insurance coverage before taking any major financial decision.
Types of Endowment Policies:
There are 3 types of basic endowment policies which one can choose from.
- Unit Linked Endowment Plan - Under Unit Linked policies, the insurance premiums are directed into multiple units held under a specific investment fund which can be chosen by the policyholders.
- Full Endowment Plan - Under this policy, the basic amount ensured to be provided will be equal to the death benefit, right from the start of the policy. Depending on the speculated market-based appreciation, the final payout provided is comparatively higher.
- Low-Cost Endowment Plan - This endowment plan has been introduced with the intention of allowing individuals to accumulate the funds which have to be paid after a specified time period, usually a mortgage.
- Non-profit Endowment Plan- A non-profit endowment plan ensures a fixed return to the policyholder, where the assured sum is paid out to the individual upon maturity. In the case of the policyholder's death, the nominee receives the sum assured as a death benefit.
How to Choose an Endowment Policy?
Just like other insurance plans, the market is now flooded with different types of endowment policies. There are several factors that come into play, when it comes to choosing the right endowment insurance policy. Individual needs, current life stage, income and risk appetite are just a few factors to consider. Given that the premiums of endowment plans are pricier as compared to term plans, the cost of premiums is also a deciding factor. After premium costs, another crucial factor to keep in mind is the insurance provider's track record in terms of bonus payments. Besides these, some other factors to keep in mind would be the customer service provided by the insurer, their claim settlement ratio, the financial status of the insurer, etc. when choosing an endowment policy, pick one which is simple and does not come with features and benefits which are difficult to comprehend and the finer details of the policy may get lost in the fine print.
Documents Required for Endowment Policy:
In order to apply for an endowment policy, customers will mostly be required to submit basic documentation such as the following:
- Fully filled out Application form/Proposal form.
- Photograph.
- Proof of residence/address proof.
- Proof of age.
- Medical reports (only if required).
Endowment Policy Premium Calculator:
With the Endowment Plan Premium Calculator, you can know the details like Premium amount, maturity value, surrender value, loan value and returns of the policy. Endowment Policy Premium calculators will ask you to input information like your age, policy term and amount of sum assured. Using this information, the calculator will compute the premium which you will be required to pay towards your endowment policy.
Riders for Endowment Policy:
Most endowment policies offer add-ons to enhance the protection provided by the policy. Some of the riders commonly available with endowment policies are as follows.
- Critical illness
- Waiver of premium
- Accidental death and dismemberment
- Accelerated sum assured
- Partial and permanent disability
- Hospital cash
Best Endowment Plans for 2025:
Endowment Policies | Policy Details |
Aviva Dhan Nirman Endowment Policy |
|
| |
BSLI Vision Endowment Plan |
|
Bajaj Allianz Endowment Policy |
|
Bharti AXA Life Elite Advantage Plan |
|
Exide Life Jeevan Uday Plan |
|
| |
| |
HDFC Life Endowment Assurance Policy |
|
| |
| |
| |
Jeevan Nivesh Plan |
|
| |
Kotak Premium Endowment Policy |
|
| |
Max Life Whole Life Super Plan |
|
MetLife Bhavishya Plus Plan |
|
Pramerica Roz Sanchay |
|
| |
Reliance Life Insurance Super Endowment Policy |
|
Reliance Endowment Policy |
|
Single Pay Endowment Assurance Plan |
|
Sahara Dhan Sanchay Jeevan Bima |
|
SBI Life Smart Bachat |
|
| |
SUD Life Jeevan Super Plus |
|
| |
|
GST of 18% is applicable on life insurance effective from the 1st of July, 2017
FAQs about Endowment Policy
- Are there any tax benefits provided by Endowment Policy?
Endowment policies do offer tax benefits under Section 80C and 10 (10D) of the Income Tax Act.
- What is the process for cancelling an Endowment Policy?
The general procedure to cancel an Endowment policy requires individuals to visit their insurance provider along with the necessary documents like the original policy document, ID proof, Surrender / Cancellation Form and a cancelled cheque for the purpose of fund transfer. While the cancellation procedure may differ with each insurer, hence it is wiser to contact your insurer to get to know the procedure.
- What happens when I surrender my Endowment Policy?
- In the event that you are not satisfied with the endowment policy or it is not fulfilling your requirements, you are under no obligation to continue with it. Policyholders have the option of exiting their policy before its maturity term and surrendering it. If a policyholder decides to withdraw his Endowment policy before the maturity period is over, it is called surrendering the policy. If an individual surrenders his policy, then the cover provided by the policy, along with the added benefits, will cease to exist. For instance, LIC allows the surrender of endowment policies only after the premiums for three full policy terms have been paid. In case the policyholder exits and surrenders the policy before this (3-term) time period, then they will not receive any pay out.
- What is meant by a paid-up endowment policy?
If a policyholder has paid premiums on their policy for a minimum of 3 years, they have the option of converting their endowment life policy to a paid up endowment policy. In case you are not satisfied with the endowment policy which you've taken but do not wish to surrender your policy, you can choose to not pay the premiums any longer. While your policy will continue till it reaches maturity, the sum assured amount will however be reduced.
- What happens when an endowment policy matures?
When an endowment policy reaches its maturity, the policyholder is entitled to receive the maturity benefits, which include the sum assured, as well as any guaranteed additions and bonuses, if applicable, provided that they have survived the policy term.
- Are bonuses received in endowment plans taxable?
The bonuses received from participating in endowment plans are not subject to taxation.
- Is an endowment plan a no-risk insurance policy?
Endowment plans are considered risk-free insurance policies as they do not involve any direct association with market volatility. These plans offer guaranteed returns that are free from risks, providing a secure option to create a corpus.
- Is a loan granted against an endowment policy?
It is possible for the policyholder to obtain a loan against their endowment policy of up to 80% of its surrender value. It is essential to finely review the policy's terms and conditions for further information regarding loans.
- Who is eligible to invest in an endowment plan?
There are typically no age restrictions for individuals who wish to invest in an endowment plan. Anyone who desires to save money for an extended period and has a low-risk tolerance can invest in an endowment insurance policy.
- Are there any consequences with endowment plans if I don't pay a premium once or twice?
Endowment plans offer flexible premium payment options, allowing policyholders to pay their premiums at their convenience, such as monthly, bi-annually, annually, or as a one-time lump sum payment. However, if a policyholder fails to pay their premium after the grace period provided by the insurer, their policy will be terminated.
- Can riders be added to endowment plans?
Yes, most endowment plans offer riders who can be selected by policyholders according to their coverage needs.
- Do riders increase the premium?
Yes, riders come with an extra premium cost. Therefore, choosing one or more riders would lead to an increase in the premium of the plan.
Disclaimer
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.