How does an Endowment Plan work?

An endowment plan is similar to a life insurance plan which not only covers the life of the insured but also helps the policyholder save money. The insured will get a lump sum amount if he or she survives the term of the policy. This maturity amount can be used for meeting financial needs such as retirement, education of children, marriage, or for buying a house. An endowment plan, if used properly, can be the best monthly pension plan in India.

Amazing features

In case the policyholder dies during the term of the plan, the beneficiary would get the sum along with bonuses. On the other hand, if the person survives the term, s/he would get the sum assured. An endowment policy can help to create a corpus for the future, giving financial protection to the family. The payout for the monthly pension plans, in either case, is higher than a normal life insurance policy. The policyholder can pay premium quarterly, monthly, yearly, or half-yearly. Several riders can be added to the plan for permanent disability, critical illness, and accidental death.

Numerous benefits

The endowment plan would offer insurance cover during the policy term. A lump-sum payment would be offered when the policy matures. You can choose from the lump sum plans or the monthly pension plans in India. This dual benefit of the endowment plan is the reason for its popularity. In addition to that, this low-risk investment option offers tax benefit under section 80C and section 10 (10D) of the IT Act. A much safer option compared to most other investment instruments can be used as a long term savings plan as the policy term can extend up to 40 years.

A wide range of types

In the unit-linked endowment plans, the premiums would be bifurcated into multiple units that are held under a specific investment fund. Try to choose the best monthly pension plan in India as it guarantees the amount from the start of the policy. The final payout is comparatively higher, depending on the bonuses that are announced by the company from time to time. The declared bonuses are paid during the time of death of the policyholder or the end of the maturity term.

Knowing the basics of an endowment plan can take you a long way when it comes to choosing the best monthly pension plan in India. It will also help you to plan your finances for your long-term goals better. Use our retirement planning calculator to plan a happy retired life.