Life insurance Plan is a contract entered into between a policyholder & an insurance provider company, where the insurer promises to pay the money in exchange for a certain premium in the event of the demise of the insured. Some of the life insurance plans can be an Investment Plan, but not all of the plans. This means some plans include both insurance & investment components, such as endowment plans, ULIPs, money back plans, & whole life insurance, & hence are considered to be an investment plan.
One example of such a plan is an endowment plan, where a policyholder is required to save a certain amount regularly up to a certain period to get a lump sum amount at the time of maturity in case they survive. This means that in case of the sudden demise of the policyholder during the policy tenure, the entire sum assured & bonus accumulated, if any, will be paid to his/ her beneficiaries. Some part of the premium amount is allocated towards life coverage, & the remaining part is accumulated as savings. In this article, we will be going through the different types of endowment plans available in the market.
Different Types of Endowment Life Insurance Plans
Provided are the different types of endowment Life Insurance plans:
Full Endowment Plan
It is a type of life insurance plan which ensures that the policyholder will be in receipt of a fixed amount at the time of maturity, i.e. sum assured. This plan is considered to be the most suitable one for those individuals who look for a combination of an investment Plan & life Insurance that will offer growth over a period of time.
Features of Full Endowment Plan
- It involves receipt of an amount to be paid on maturity if the policyholder dies.
- The payout amount may include an additional bonus depending on the performance.
- It offers flexibility in making the payment of the premium amount.
- As it is not linked to the market, it involves less risk.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Low-Cost Endowment Plan
This investment plan includes a low premium cost while ensuring a guaranteed sum assured, allowing one to achieve financial objectives.
Features of Low-Cost Endowment Plan
- It involves receipt of an amount to be paid on maturity if the policyholder dies.
- It offers a low-cost premium amount.
- It may also offer an additional bonus amount.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Unitized With-Profit Endowment Plan
It is a combination of guaranteed & non-guaranteed returns depending on the market situation, creating a balance between growth & security.
Features of the Unitized With-Profit Endowment Plan
- It includes some portion of premium to be invested in market securities, hence offering higher returns.
- It provides a guaranteed sum assured along with additional bonuses, if any.
- It offers flexibility in payments of premium, i.e. single, regular, or limited.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Non-Profit Endowment Plan
It includes receipt of a fixed lump sum amount as a maturity or death benefit, without any additional bonus.
Features of Non-Profit Endowment Plan
- It does not offer any additional riders or bonuses.
- It provides stable returns due to its being linked to markets.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
- Unit-Linked Endowment Plan
It invests funds in market securities, hence offering high returns with guaranteed benefits. This plan best suits those individuals who are willing to take risks.
Features of Unit-Linked Endowment Plan
- It offers a guaranteed return with market share.
- It offers flexibility in making payments towards the premium, i.e. single, regular, or limited.
- It involves a higher risk linked to the market.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
- Guaranteed Endowment Plan
Those looking for stable returns can opt for this plan as it involves the receipt of a lump sum amount at maturity along with loyalty points.
Features of the Guaranteed Endowment Plan
- It offers guaranteed receipt of the sum assured at the time of maturity, hence making them financially secure.
- Additionally, it offers loyalty points depending on their performance.
- It includes low risk & stable returns due to it not being linked to the market.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Limited Premium Payment Endowment Plan
This plan involves payment of a premium for a shorter period, though offering benefits of longer duration, making it ideal for those who want to finish up with making payments faster.
Features of Limited Premium Payment Endowment Plan
- It offers an expandable coverage even when the payment of the premium amount is completed.
- They are considered to be safe as they are not linked to the market.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Money-Back Endowment Plan
It includes periodic payouts along with the amount of remaining sum assured & bonus to be provided at the time of maturity, hence offering a regular source of returns.
Features of Money-Back Endowment Plan
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- It offers liquidity by providing periodic & regular payouts.
- Along with regular payouts, it offers a lump sum at the time of maturity.
- It offers flexibility in making payments towards the premium, i.e. single, regular, or limited.
- The premium paid is eligible for a deduction of tax u/s 80C.
- The maturity proceeds are also exempt from tax u/s 10(10D).
Conclusion
Before buying an endowment plan, it becomes essential to know its different types because every plan has its own pros & cons. Each plan type offers a unique combination of life insurance & investment, helping to achieve the financial objectives in terms of periodic returns, long-term security, wealth creation, etc. One can make a well-informed decision to choose the best suitable plan depending on your requirements & financial objectives, hence offering mental peace.