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Overview of Endowment Products
An Endowment Policy is a savings linked insurance policy with a specific maturity date. On your surviving the term, the maturity proceeds on the policy become payable. These plans help you to save money and also provide you investment opportunity to grow your money. In addition, should an unfortunate event by way of death or disability occur to you during the period, the sum assured will be paid to your beneficiaries.
How it works - Endowment Insurance Plans
Endowment policies cover the insured for a specified period. The policyholder has the option to insure himself till he or she wishes to be insured. Upon the death of the insured (during the term of the policy), the beneficiary receives the sum assured plus the bonus, if any. Bonus is paid for the number of years the policy was in force. Upon maturity, the insured receives the sum assured plus the bonus for the term of the policy. Thereafter, the insured is not covered by the policy.
Types of Endowment Plans: Endowment plans can be broadly divided into two types.
Endowment without profit: Under this plan, the beneficiary receives the assured corpus at the death of policyholder. This plan does not offer any bonus on the amount paid. It is suitable if you are looking for a life cover.
Endowment with profit: In this plan, the policyholder, if survives the policy term, receives the assured corpus along with bonuses at the time of maturity. In case of the death of the insured, the beneficiary gets the assured amount as well as bonus for the number of years the policy was in effect.
Why Endowment Insurance Plans?
- These are low risk plans, offering guaranteed returns to the policyholder
- In case of policyholder’s demise the assured amount is paid to the nominee
- Secures the future of loved ones, offers financial security
- Offers tax benefits as per the prevailing tax laws. The assured sum received by the insured upon maturity is tax-free.
- Offers slow yet steady returns, as they are not linked to market
- Allows the policyholder to choose from a wide range of additional riders, as per his/her requirements. Some of these are Accidental Death Benefit, Accidental Permanent, Hospital cash Benefit, Total or Partial Disability Benefit, Family Income Benefit, Waiver of premium Benefit, Critical Illness Benefit, etc.
Guaranteed returns: These plans ensure that a stipulated amount is paid at the end of the term. If the policyholder lives until the maturity, he/she is given the assured amount. However, in case of the death of the insured, the amount is transferred to the nominee.
Additional Bonuses: The policyholders with with-profit plans are provided with some additional bonuses as well. Under this, additional amount is added to returns at the time of maturity of the policy or in case policyholder’s death. Reversionary Bonus and Terminal Bonus are two types of bonuses.
Endowment Plans work best if taken for 15 to 20 years as the accumulation period is then substantial which results in a high maturity amount at the end of the policy term. The maturity amount can be used to fund some large expenses like child's higher education or marriage or even an amount which will be useful when you are close to retirement.
Benefits of Endowment Plans
Endowment Plans offer Guaranteed Additions and Bonuses in addition the Sum Assured which get added to the policy holder's account every year. These benefits along with the Tax Savings make this life Endowment plans offer a safe and tax free way to invest your money and get insurance cover at the same time.
So for those looking to save tax and are not comfortable with mutual funds etc. find this as an attractive mode of investment. Also it forces long term savings and ensures that the money returned at the end of the policy term is sizeable.
To select the Best Endowment Insurance Plan in India, please get in touch with a licensed insurance professional of Bimadirect.