An endowment policy is a life insurance policy that comes with the benefits of both insurance and savings. Owing to its saving component, an endowment policy helps the policy holder to make savings for the future for a particular period of time so that they can avail the lump-sum amount at the time of maturity of the policy.

Endowment plan entitles the nominee of the policy to receive the death benefit along with the amount of bonus (if any) in case of sudden demise of the policy holder.

In case the policy holder survives the specified period which is also known as the maturity period, or endowment policy tern, or the survival term, he is entitled to receive a lump-sum amount from the insurer.

The other important benefit that an endowment policy provides is that it helps the insured a corpus for his future to meet the long-term and short-term financial objectives like retirement, child’s higher education or marriage, repaying a loan amount or buying a new house etc.

1. Unit Linked Endowment Plans: Suitable for individuals having a high risk appetite and want higher returns can opt for Unit Linked Endowment Plan. Under this plan the premium paid by the insured is bifurcated into different units as chosen by the insured.
2. Full/With Profit Endowment: Under this plan the insured receives the sum assured by the insurer. The amount to be paid is guaranteed at the start of the policy and is comparatively higher. This higher amount depends on the bonuses (if any) which are announced by the company from time to time. The bonuses declared are paid either at the time of death of the policyholder or at the time of maturity of the policy.
3. Lost-Cost Endowment: The main purpose of these endowment plans are to let the policy holder accumulate funds for the future, which are to be paid after a particular period of time. The plans are usually used for repayment of loans, mortgage etc. The amount is paid as the minimum sum assured to the nominee in case of death of the policyholder.
4. Non-profit Endowment: It is a traditional endowment policy where the sum assured is paid either to the policyholder as the maturity benefit or to the beneficiary as the death benefit in case of demise of the policyholder.

• The insured gets a lump sum payment at the time of maturity of the policy.
• It provides insurance cover during the term of the policy.
• It serves the dual purpose of providing insurance cover and the benefit of long-term investment.
• The policyholder gets tax exemption on both the premium paid and the maturity and final payouts under section 80C and section 10 (10D) of the Income Tax Act.
• Insurance companies declare bonuses which is the extra amount of money added to the proceeds and is distributed to the policyholders.
• They are a relatively safer option of investment.
• It offers an opportunity to save for a long term.
• You can enhance your endowment policy by opting for additional riders to the policy like waiver of premium, family income benefit, covering critical illness, accidental benefit etc.