Probably this is the right time to start saving!
You must have grown listening to these healthy pieces of advice. After all it is a simple fact that we are made to learn from the time we grow.
Well, some are able to save and invest the money as much as they need. The others find it difficult because the living expenses are way higher than what is expected. At times, sudden unexpected expenditures can shake the family’s financial health. And this has been the reason why you were always taught to save for the odds. Decoded it here! But the solution is still to explore.
No cash means no spending power. If you wish that nothing of this sort should happen with you in the future, the best saviour is to buy an endowment plan, invest money in funds, and develop a discipline to save.
The rest two are simple, let us explore the savings possibilities with an endowment plan.
What is an Endowment Plan?
Endowment plan or savings plan is a life insurance policy that gives dual benefit of savings and life cover protection in a single plan. Savings is preparing a financial cushion to achieve your dream in the future. When you save, you are one step closer to achieving your life goals.
Over the years of savings, you build a substantial corpus to financially protect the family in case of an emergency.
When to buy an endowment plan?
Endowment policy is a life insurance cum savings plan that helps you collect funds over a period of time. At the end of the maturity period, you will get a cumulative sum according to the term and conditions mentioned in the policy. It is said that buying an endowment plan in your 20s or 30s is appropriate. Let us see the reasons why?
- You can buy an endowment plan at an early age because the premium is less when you are young. It is the suitable time because you have lesser responsibilities and you can spare the money aside for premium payments.
- Buying an endowment plan early is favourable because the premium prices are low. It is due to the fact that you are at a low risk of disease/death.
- You can buy an endowment plan if you are planning for a risk-free assured investment to be a part of your investment portfolio. If long-term savings is on your cards, then putting your money in endowment plan will be wise.
Why buy an endowment plan?
These are the reasons of why you should buy an endowment plan:
- You need money for future goals: An endowment is a type of life insurance that allows the life insured to make investments over a long period of time. At the time of maturity, the amount you receive helps you meet several financial obligations like pay for home loan, save for retirement, buying a home, or their children’s marriage. However, in case of any unfortunate demise of the life insured, the entire sum assured will be paid to the nominee.
- Protect the family: The endowment plan is no doubt a means of savings but the insurance policy also comes with the element of life cover. If any unfortunate event occurs with the life insured, the policy will pay the sum assured as death benefit to the nominee.
- Tax benefit: The taxpayers who look for income tax deduction for the premium they pay for the life insurance policy can use the endowment plan. The insurance policy helps to claim for tax deduction under Section 80C of Income Tax Act, 1961. Apart from the savings components, income tax benefit is a reason to buy the endowment plan.
Next we will see the type of endowment plans that you can buy.
Types of Endowment Plans you can buy.
These are the types of Endowment Plans that you can buy:
Full endowment plans are also known as profit endowment plans. These savings plans guarantee you a fixed amount at the end of the policy period. But if life insured passes away during the policy period, the nominee will get the death benefit. The insurance company gives you additional money as incentives which is received at the maturity of the policy. This amount is higher than the sum assured at last which is why full endowment plans help in accumulating high sums assured.
- Low-Cost Endowment:
Under the low cost endowment plan the main goal is to set up a fund within a specified time. The premium for this type of policy is lesser and these can be used to fund loan repayments. In case of any unexpected event that happens with the life insured, the policy will pay the nominee the death benefit as specified.
- Unitised with Profit Endowment Plan:
This endowment plan combines with it the features of ULIP. The earning potential as saving increases with guaranteed returns. The plan guarantees the payment at the maturity which removes the hassles of impact from the market. So even with the component of investment, the returns are guaranteed and risk-free.
- Non-Profit Endowment:
Under the non-profit endowment plan, the policy pays lump sum payment at maturity or to the nominee if there occurs any catastrophic event. There is no element of bonus associated with the endowment plan. Though non-profit, the endowment plan creates safety for the family when you are not there to take care of the family.
- Unit-Linked Endowment Plan:
The premium under the Unit-Linked Endowment Plan is to invest in the fixed term plan. The returns will be based on the market performances. The plan will include life insurance cover for the insured.
Best endowment plan in India
Though there are several insurance companies that offer endowment plans. Out of all, the best endowment plan in India is from Aditya Birla Sun Life Insurance Policy. The insurance company offers 14 plans for its customers. Each plan serves a different purpose with a different rate of return. Still, if you are looking for one affordable plan, you can think of buying ABSLI Assured Savings Plan.
Let us see below what the plan offers.
ABSLI Assured Savings Plan.
The key features of the ABSLI Assured Savings Plan are:
- The plan provides guaranteed benefits on death or maturity.
- Loyalty additions that boost the maturity corpus year on year.
- The plan offers multiple policy and premium payment term options.
- Under the plan, the life insured can choose to get the spouse covered by choosing joint life protection cover. The coverage for the secondary life insured will be equal to 20% of the sum assured for the primary life insured.
- The savings plan offers death benefits which implies that the nominee will get the sum assured if the life insured passes away during the policy term.
- The policy type offers maturity benefits on survival of the life insured provided the policy is in-force. You will receive the maturity benefit which is equal to guaranteed maturity benefit plus accrued loyalty additions.
Savings plans or endowment plans are the safe insurance policies if you are looking for investment, insurance, and tax savings. The insurance policy gives you a benefit of guaranteed return along with the bonuses that the insurer will pay. The amount ultimately received at the end of the maturity period is higher than the sum assured. The endowment plan makes it easy to generate a monthly income stream which is beneficial especially if you retire. The endowment plan helps to achieve the bigger objectives of life hence it is better to start saving for family’s protection and security. For more details on the endowment plan, you can read here.