How to Choose the Best Endowment Plan?

An Endowment Plan helps individuals fulfill their various financial needs as well as provides a death benefit to the nominee in case of policyholder’s demise during the policy term. One of the best things about these plans is the accumulated bonuses (if any) that policyholders can get at maturity. Simply put, an endowment plan provides you a combination of insurance and savings.

In the current times, there are several endowment plan options for individuals from which they can choose. But they often find themselves stuck at the ‘HOW’ of it. On this page, we will discuss the points to help you choose the best endowment plan for yourself. Keep reading to know more.

Factors to Keep in Mind When Choosing the Best Endowment Plan

We have talked about the crucial things to remember when selecting the best endowment plan for yourself below. Do check.

Understand Different Types of Endowment Plan and Choose Accordingly

Before zeroing on the final choice when choosing the endowment plan, you must understand its different types. Please check the different types of endowment plans mentioned below.

• Low-cost Endowment Plan (Build wealth for future over a fixed period)
• Full (with profit) Endowment Plan (Higher final payout due to bonuses)
• Unit-linked Endowment Plan (Suitable for people with high-risk appetite)Guaranteed Policy (Guaranteed sum assured to the beneficiary or nominee in case of death)
• Non-profit Endowment Plan (Fixed lump sum amount in case of maturity or death with no bonuses)

Check the Key Features of Endowment Plans and Compare Accordingly

Endowment plans offer a wide range of exciting features that you should keep in mind before selecting a suitable plan for you. These features are higher returns, flexible policy terms, low-risk investment options, tax benefits, premium payment frequency, premium amount, premium payment term, etc. Compare different plans according to these features before choosing the plan.

See Whether Your Endowment Plan is Providing Bonus or Not

Endowment plans offer bonuses at the time of maturity. However, you should check whether your plan will provide a bonus or not so that you can choose accordingly. Plans that participate in the annual bonus declared by the insurer offer bonuses to the policyholders. The bonus amount is usually a fixed percentage of the sum assured or a fixed amount and depends on the chosen plan. Endowment Plans offer the following types of bonuses.

• Simple Reversionary Bonus (Declared by the company at the end of each policy year)
• Terminal Bonus (Payable as a lump sum at the end of policy term)
• Interim Bonus (In case of death or surrender during the inter-valuation period)

Check the Flexibility of Premium Payment

Endowment plans also allow policyholders to choose from multiple premium payment options – Single Pay, Regular Pay and Limited Pay. Choose the premium payment option that is affordable to you. Some insurers provide the option to pay the premium on a monthly, quarterly, half-yearly or yearly basis.

Contemplate Rider Options to Enhance Your Coverage

Endowment plans also come with a wide range of rider options that you can choose to enhance your existing coverage by paying an additional premium. Before selecting a plan, you should see the list of available riders with the plan. Some of the popular rider options are mentioned below.

• Critical Illness Rider (Lump sum amount in case of a diagnosis of a critical illness like cancer, heart attack, etc.)
• Accidental Death Rider (Additional death benefit over the base sum assured in case of accidental death)
• Accidental Permanent or Partial Disability Rider
• Waiver of Premium Benefit (In case of a critical illness or disability, future premiums will be waived off)
• Hospital Cash Benefit (Daily cash in case of hospitalization due to an accident)

Bottom Line

Once you choose the best endowment plan considering the aforementioned points, make sure to invest as early as possible to build a corpus over time. The reason being an early investment will give you a longer investment horizon (time in the hand to get the desired return) as compared to an individual starting late. Investing early would also help you enjoy the miracle of compounding.