What is Endowment policy?
Endowment policy is type of life insurance policy which provides insurance cover and maturity benefits too. Basically, endowment plan is term insurance policy with maturity benefits. In case of demise of policyholder, the Sum Assured is paid to the beneficiary. On survival of policyholder, the accumulated amount along with bonuses is paid.
Endowment plans are priced a little higher than term plans because of maturity benefits.
Additional Bonuses:
Generally, Endowment plans have two types of bonuses:
- Reversionary bonus: Also called regular bonus, this is annual bonus which depends on the performance of the insurer and is added to the fund every year payable at the end of policy period.
- Terminal bonus: An additional loyalty bonus offered by the insurer at the end of policy term
Tax Benefits:
Under Section 80C you can avail tax benefit, yearly premium (not more than 1lac) will be deducted from taxable income.
Under Section 10(10D) death claim is completely tax free.
The Good:
Endowment plans have both death and survival benefits.
The bonuses accumulate over time to give good maturity lump sum
The Bad:
Endowment plans are priced higher than term plans.
Policybazaar Judgment on Endowment Plans:
Endowment plans is for people looking for survival benefits along with death benefit. Though priced higher, it is worth it to buy endowment plans since its no profit no loss equation as premiums paid are returned in form of survival benefits. And you get insurance life cover which is important thing to have.
