The Right Time To Buy An Endowment Plan

New Delhi : “Save as early as possible in life.”

“It is never too late before you start saving.”

“Save every penny, you will need most of it in the future.”

All of these have come from the elders and the wisemen who have tasted life from different aspects. Well, a few individuals who aim to save money do it by keeping aside a percentage of monthly income. While others buy endowment plans to save mindfully. 

Does that leave you excited? You must be wondering how an endowment plan helps you save. Rather in the first place, what is it?

If yes, then read further.

What is an endowment plan?

Endowment plan is popularly also called the savings plan. It is a life insurance policy that comes with dual benefits of savings as well as life protection. The insurance cover provides you an opportunity to save money over the years to accomplish your future dreams. 

The life protection cover under the policy is to benefit the nominee (declared at the inception of the policy). If the life insured passes away during the policy term, the nominee will get the sum assured along with the maturity benefit accumulated over the years.

After reading and finding what the policy is, you must be eager to know how much the policy allows you to save. If that comes to your mind, learn the simple fact that if you are unable to spare a portion of your salary, it is important that you save now for your future needs.

For more details, let us read the features of the endowment plan.

Features of an Endowment Plan.

These are the features of an Endowment plan:

• Pay in Lump Sum at Maturity: The endowment plan is a life insurance policy through which the life insured saves regularly to attain the future goals. At the end of the policy term, if the life insured survives the policy term, the insurance company pays the maturity amount as the lump sum. This maturity amount can then be used to accomplish various financial goals, both short-term and long-term.
  
• Death Benefit: If the life insured passes away during the policy period, the insurance company will pay the complete sum assured along with the bonuses earned to the nominee. 
• Premium Payment: Endowment plan allows the insured to choose the premium payment frequency. The policyholder can opt to pay the premium either monthly, half-yearly, or annually. The insured can also choose to pay the premium all at once.
• Tax Benefits: The premium paid under the endowment plan is eligible for tax deduction under Section 80C of Income Tax Act, 1961. The amount received on maturity is also tax exempt under Section 10(10D).

After analysing the features of the endowment plan, the next you must know is the right time to buy the endowment plan:

The Right Time to Buy an Endowment Plan.

• The right time to buy an endowment plan is NOW. Consider these scenarios and understand why buying the endowment policy early is relevant. 
• You are in your late 20’s or 30’s. As soon as you start earning and sharing the family’s financial responsibility, you must buy an endowment plan. Sooner, you start to get the benefit of the power of compounding to get more returns on the premium investments you made.
• When you have a long-term goal: If you have a long-term goal like building a house, buying an endowment plan is essential. It helps you save money for your future requirements. You can save to support the family in completing the future aim even if you are absent. The insurance policy will help them handle the goals as well as financial constraint when you are not around.
• For short-term goals: Other than the long-term goals, the endowment plan will also enable you to save for a short-term goal. So, if you think that sparing money every month for your next family vacation abroad or your next car is impossible,  buy an endowment plan.

Types of Endowment Plan you can buy.

If you have made your mind in buying the endowment plan, you must also know what are the types of the endowment plan you must invest in.

• Full-endowments: The full endowment plans are also called as with-profit endowment plans. Such life insurance policies guarantee you a certain amount at the end of the policy term.The policy comes with additional bonuses that the insurance company shares. It makes the amount receivable at the maturity always more than the initial sum assured.
  
• Low-cost endowment plan: The premium for this type of endowment plan is lower, which permits you to put something aside for future premium amounts which you will have to pay for a certain timeframe. In case of a crisis, the insurance policy will ensure the sum your nominee is liable to get. Yearly rewards additionally help the sum you'll get when you arrive at retirement age.
• The primary objective is to build up an asset in years. The benefits from the plan can be used to fulfil your explicit future life goals.
• Unitised with profit endowment plan: The endowment plan allows you to invest in the ULIP governed savings plan. The insurance policy protects your savings as well as yields you high returns as the product is market-linked.
• Non-profit endowment: The payout amount under this kind of endowment plan is static as it does not include any bonus. In case of any unfortunate event, the insurance company pays the nominee the amount which is static.
• Unit-linked endowment plan: Unit-Linked Endowment plan is for those who wish to reap higher returns after making premium investment over the policy term.

Benefits of an Endowment Plan.

• These are the benefits of an endowment plan that helps you take a decision for buying the policy:
• The policy offers both life cover as well as a savings plan. 
• Endowment plans offer risk-free returns.
• The plan offers a guaranteed bonus at the time of maturity.
• The endowment plan can be enhanced with rider covers to increase the scope of cover.
• The endowment plan also gives tax benefits under Section 80C and Section 10(10D) of Income Tax Act, 1961.

Things to consider before buying an Endowment Plan.

These are the things you can consider before buying an endowment plan.

• Buy early: You can start early when it is about the savings plan. Over the years,you can save more with the power of compounding. 
  
• Check the plan features: Before buying the savings plan, you must check the plan features like flexible premium payment option, free withdrawals, additional benefits will be most suitable.
• Plan after you decide your life goal: Choose a savings plan based on your life goals, which can be vacation abroad, saving for retirement, buying an expensive car or a dream home.
• Check online availability: Verify if the plan is available online or not. When the plan is available online you can evaluate and compare the plans. You can also review the returns on your endowment plan. Also buying online will be best as the premium will be less and it saves you time.
  
• Claim settlement ratio: Check what is the claim settlement ratio of the company. It denotes how fast and how many claims an insurer settles from the total claims received.
• Premium Paying Flexibility: Choose a savings plan that offers premium payment flexibility. Apart from flexibility for premium payments, you can also select the payment term and premium. The savings plan gives the flexibility to pay premium on annual, monthly, quarterly, or half-yearly basis. If you have irregular income levels, you can choose to pay an annual-one time premium. Those who make regular income can pay a monthly premium.  
• Guaranteed Returns: Consider your goal of buying an insurance policy. If you do not want any risk on returns, look for guaranteed returns.
• Liquidity of the plan: A savings plan that allows money withdrawals in an emergency will be the appropriate pick.

Conclusion

The right time to buy or decide to buy things like savings in life is always sooner than you think. Start planning for your future and family’s protection the time you can afford the insurance policy. For more details on the endowment plan, visit here.