Being financially prudent is an important habit to have in today’s world. Even if one earns a high income, there is no saying when an unfortunate event will strike and turn things around. The best way to keep yourself safe in such a situation is to have savings or an investment plan in place. The latter ones often come with risks and so, if you like to play it safe, you should ideally opt for a savings plan. Nowadays, one can also opt for savings plans that come with insurance coverage so that you hit both your financial targets with one stone. An endowment insurance policy is one such plan. It allows you to enjoy the benefits of life coverage as well as save on a regular basis.
Opting for an endowment plan can lead to positive changes as time passes. The benefits offered by the plan are an effective way to achieve freedom and security, financially. Let’s look at how.
Features of endowment plans
- Coverage and savings under one product
If you look at any well-designed financial portfolio, it tends to have, amongst other things, a savings plan as well as a life insurance policy. Rather than go through the hassle of buying two separate products to meet those features, you can simply buy an endowment plan. Your premiums take care of both aspects of the plan. One portion of the premium is used to build your life insurance cover and the other is used to create a savings corpus. With each premium payment, your corpus increases, until the time of maturity, when you become eligible to receive the entire sum of money.
In the unfortunate circumstance of the policyholder’s demise, the nominees chosen by them receive the sum assured amount. Thus, you can lock a secured amount for your loved ones as well as for your future self.
- Low risk-low reward approach
As mentioned earlier, endowment plans are an ideal option for those looking for a safe approach to their savings. Endowment insurance plans have low risks and, hence, have comparatively lower returns as compared to high-risk investment plans. Your endowment savings are invested in fixed-income instruments, such as fixed deposits. So, your money is relatively free from the influence of market fluctuations. That is why many endowment plans also claim to provide you with guaranteed returns. This is a great way to accumulate wealth and generate decent returns so that, at a later point in life, you have the financial freedom to pursue your goals.
- Option of additional bonuses
If you are okay with a certain amount of risk, then you can choose the bonus feature of an endowment plan. With this feature, you receive a loyalty addition to your sum assured amount. This addition is usually based on the profits of the company. These bonuses are added to the sum assured amount and provided to the beneficiaries of the policy as a part of the life cover amount.
- Tax benefits
Buying any life insurance policy is an effective way to save on taxes. As per Section 80C of the Income Tax Act, 1961, the premiums you pay against your life policy can be used to claim deductions up to Rs 1.5 lakhs. With an endowment plan, you get even more tax benefits in the form of tax exemptions. The maturity proceeds of your plan are exempted from taxation up to a certain extent as per Section 10 (10D). You can add an endowment plan as a part of your long-term tax-saving strategy so that your money does not erode in taxes.
Tax benefits are subject to terms and conditions and may change from time to time.
- Multiple premium payment options
Does the premium estimated by the life insurance calculator seem like a figure out of your budget? Indeed, the road to financial freedom is not an easy one. You may not have the financial resources to save every month and park your money in the endowment policy. However, this does not mean that you lose out on the benefits of the plan. You can simply opt for a half-yearly or yearly premium payment option. Most endowment plans offer this feature.
You can also tweak the variables in the life insurance calculator to achieve a more cost-effective premium estimate for yourself.
With the right amount of planning, your endowment plan can help you curate the path to financial freedom and security and ensure your future as well as that of your loved ones.