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Endowment Insurance Plan

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What is an Endowment Policy?

An Endowment policy is an investment plan which comes with a life insurance cover. You pay regular premiums for 5, 10, 15 or more years and get your returns at the end of the policy term. In case of death of the policyholder during the policy term, the nominee receives life cover benefit.

Endowment plans are popular for investing in long term goals like child's education or marriage or for planning your retirement. Both the premiums paid and the investment returns are tax free. You must keep in mind that endowment plans are conservative plans and designed more at conserving your capital and hence has lower risks.

Types of Endowment Policies

Endowment policies can be broadly classified under the following 2 categories:

Guaranteed Returns Endowment Plan

In such plans, the exact amount which will be paid to you is known in advance. It gives you an accurate amount and hence the returns which you will receive at maturity.

With-profits Endowment Plan

In this type of plan, the returns which you receive will depend on the performance of the company. Depending on how the company performs you will receive bonus and additions which get added to your plan and are paid to you on maturity. As a result, the returns are not guaranteed and you cannot know the exact amount which you will receive on maturity.

Benefits of Endowment Policy

Life insurance
Long term
Low risk
Flexibility to receive
income in lumpsum or
monthly payouts
Tax Savings on
premiums and maturity

Who should buy an Endowment Policy?

You should consider investing in Endowment Policies if:

  • You want to long term savings
  • Don't want to take too much risk
  • Want to plan for expenses like child's marriage or education which in a systematic way
  • Want to save tax

How does an Endowment Policy work?

You pay regular premiums - monthly, quarterly, half-yearly or yearly

These plans are long term investments

The company invests your money in low risk financial instruments

At the end of the policy term, the company pays you the invested amount with gains

The returns could be guaranteed or linked to the company performance

You enjoy a life insurance coverage throughout the policy term

Endowment Vs Money Back Policy

Endowment PolicyMoney Back Policy
Returns on MaturityReturns are regular intervals
Lower premiumsComparatively higher premiums
Long term investmentLong term investment
Offers tax benefitsOffers tax benefits

Endowment Policy Vs Term Insurance

Endowment PolicyTerm Insurance
Returns on MaturityNo returns
Low insurance coveragePure risk cover with high insurance cover
Higher premiumsLower premiums
Best for long term investmentsBest for life insurance cover
Offers tax benefitsOffers tax benefits

Endowment Policy Vs ULIPs

Endowment PolicyULIPs
Low risk investmentsHigh risk investments
Stable, guaranteed returnsChances or higher returns
Less flexibility to exitCan exit after 5 years
No flexibility in investment optionsOffers a variety of investment options - high risk to low risk
Offers tax benefitsOffers tax benefits

How to Choose an Endowment Policy?

  • Decide on the amount you wish to invest
  • Decide on the number of years you wish to pay premiums
  • Decide on policy term - when you wish to get your returns
  • Choose between “Guaranteed Returns” or “With Profits” plan
  • Go ahead and invest

Riders for Endowment Policy

Some of the popular riders which can be taken with Endowment plans:

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Critical Illness Rider

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Accidental Death & Disability Benefit Rider

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Term Rider

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Waiver of Premium Rider

FAQs on Endowment Plan

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What is the Claim Process of Endowment Plan?

Maturity Claim:

In case your bank details are updated with the insurer, the maturity amount will be credited to the bank account. You do not need to do anything.

Death Claim:

this is a standard process across life insurance plans

  • Fill up with claim form
  • Submit required documents
  • Insurance company verifies the documents and claim details
  • Claim is settled
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Documents required for purchasing an endowment plan

  • KYC Documents - like PAN, Aadhaar
  • Income Documents - life Payslips, IT Returns or Bank Statements
  • Address Proof - like Aadhaar
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What happens when an endowment policy matures?

On maturity of an endowment plan, the investment returns will be paid to you - this is called the Maturity Benefit of the Endowment plan. You can choose to take your money as a lumpsum or at regular intervals or a combination of both
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Are endowment plans tax-free?

Premiums paid and the investment returns in Endowment Plans are tax free upto a certain limit. It is best to check the tax implications before making an investment.