Endowment policies are nothing but life insurance that offers life cover along with the investment provision at moderate-risk. These policies are considered to be safer than ULIPs or any other investment, primarily linked to equities. However, before going for any policy, you must check a few factors about the endowment policy, such as it’s pros and cons as well as other aspects such as the return on investments. Read further to know more.
Usually, endowment plans are availed to take care of future financial needs. It is the dual advantage as the policy is primarily designed to provide life coverage to the insured person. It also nurtures the habit of systematic savings into you. The insurance factor is helpful in case of any uncertainty that it takes care of your loved ones behind you. But when it comes to investment, the returns are lower as compared to ULIPs or other cash value plans, but on the other hand, they are guaranteed. Like other life insurance plans, endowment plans also offer tax benefits. This is the primary reason why endowment plans are recommended to the people having a low-risk appetite. Moreover, the following are a few things that you need to take care of.
The endowment plans available in the market are almost similar to each other. However, some insurance providers offer endowment plans that suit your needs appropriately. You always need to consider a few critical factors while opting for the policy. E.g., your needs, the lifestyle you are following, your monthly income, expected lifestyle, and most importantly your risk hunger.
The premium rates are also significant because the affordability of the plan is dependent on the premium costs. Endowment policies can be a good option for term return of premium plans as they are slightly costlier but offer much more. But if you are purchasing it for the sake of life coverage, you need to think once! In such cases, term insurance would be a better option.
One more crucial thing is the record of the insurer. Endowment plans offer inferior returns as compared to ULIPs but the bonuses accrued over the period are also significant. Bonuses add value to the gains you are expected to get. Similarly, another thing is claim settlement ratio must be checked off every insurer. IRDAI rates every company based on several factors and claim settlement ratio is one of the main aspects.
To conclude, it is always advised that get a comprehensive plan by analysing several plans, to avoid the chaos and complexities in the future. Simplicity brings more clarity; thus, choose the plan which is best suitable for your needs.