Endowment Plan

Life insurance cover with a savings component. Apart from death benefit, a predetermined sum is paid at the end of a specified term. A plan in which the amount is paid to a policyholder if he outlives the tenure of the contract or to the beneficiary if the insured person dies before the date on which the policy matures.

Endowment policies can be cashed in earlier stage. It is called surrender. In this case, the policy holder receives the surrender amount which is determined by the insurer or the insurance company depending on the period or how long the policy has been running. It also depends on the policy amount that is left.

Types of Endowment policies popular in the market are as follows

• Unit-linked endowment

  This is a fixed term saving plan with an opportunity of life coverage. In this plan your savings can be invested in market shares thus the return you get from this completely depends upon on the performance of your investment. If you are ready to play with the market risks then this is the best option.

• Full endowments

  In Full Endowment plan at the start of policy you will be assured with basic sumwhich is also equal to death benefit. However the amount you get at the end of maturity depends on the annual growth rate. Actually your premium amount will be pooled into company’s or some other investment and each year a bonus is added into your credit. Thus final amount paid to you will be usually higher than the assured fund.

• Low cost endowment

  In this endowment plan the anticipated future growth rate of the amount will meet the target amount and the guaranteed life insurance element. In case of death, this target amount will be paid as the minimum assured sum. Usually Low Cost Endowment plan is used to pay off a mortgage and this is the major advantage of this policy. However investor may increase the premium amount to collect the enough money to clear their mortgage.

• Unitised with profit endowment

  This is a form of profit endowment where the value of units is calculated annually and this value is guaranteed in order to form a minimum return amount. This guaranteed sum remains unaffected from the market risks thus giving you relief. However the guaranteed amount is less than the actual value but if you want to escape from the volatility of market this is a safe investment.

• Non profit endowment

  As the name suggests this plan does not add any bonus for the amount you pay as no sum is invested in shares. If you are looking for a policy to pay off your mortgage then this will not help you but,if you need only life coverage then you can opt for it.