There are many ways through which you can save or invest your hard-earned money to fulfil your financial goals in the future. One such way is to invest in endowment life insurance plans. They offer advantages of life insurance along with the benefit of steady returns.
Endowment plans are not to be confused with any other life insurance investment. One such option is term life insurance meaning financial security for accidents and emergencies. On the other hand, an endowment policy offers security for a lifetime along with a stable rate of returns. To know what term life insurance offers and what an endowment plan holds, you can find out more about Term Insurance and whether it is worth the hype.
Thus, it can also be considered as an investment that yields a fixed rate of return without any exposure to market risk. Just as there are certain advantages of life insurance, there are also certain advantages and notable features of endowment plans. Let’s take a look at how endowment insurance actually works.
If you have a long-term financial goal that you wish to plan for today, you will need enough money to bring it to fruition. In such a case, an endowment policy makes sense. You can invest in an endowment plan today to fulfil a specific goal or goals in the future.
And on maturity of your endowment plan at a desired date in the future, you will earn back the amount invested at a fixed rate. This will enable you to fulfil your goal, be it your children’s education or to own a bigger house for yourself and your family. The financial safety net that an endowment plan provides in case the worst happens to the primary breadwinner is something every urban householder should avail. This safety net is not present in instruments such as Mutual Funds, PPF, or NPS.
Be it in investments, savings instruments or even life insurance plans, the early bird catches the worm. So, if you start with an endowment life insurance investment to achieve a long-term goal, it is advisable to do it as early as possible. By the time the moment arrives to pay for your children’s fees or to buy a new bigger home for your loved ones, you might already have a sizeable corpus to take care of the same. And like in any insurance plan, your family are also entitled to advantages of life insurance in the case of your untimely death.
As many of you must already be aware of the valuable advantages of life insurance, an endowment policy offers a combination of life insurance meaning financial security and stable returns in the long-term period. The maturity benefit that an investor would receive on the maturity of an endowment plan is usually sufficient to fulfil his or her desired financial goals, provided that one has begun early so as to be entitled to a bigger corpus of earnings. And true to today’s requirement for greater flexibility, endowment plan premiums can be paid on a monthly, half-yearly, or even annual basis.
Under Section 80C, of the Income Tax Act 1961, you are entitled to deductions worth up to Rs. 1.5 lakhs for all the premiums you have paid in the respective financial year (as per the old tax regime). So, if you stay invested in an endowment plan in the long run, it means that every year, you stand to claim a reasonable tax benefit.
When you choose what you think to be the best endowment plan to begin with, it would also be helpful to calculate the returns and arrive at a fair estimate of the same. Most issuers of endowment schemes provide their customers with interactive and intuitive digital tools for this purpose. All that an investor needs to do is specify whether he or she is investing for oneself, one’s spouse, child, or grandchild. By factoring in your annual income, and considering your desired objectives, you can not only decide what amount would be suitable for investment but also estimate the returns that you can earn at the time of maturity.
With some shrewd financial planning, you can further streamline your investment in what will be for you the best endowment policy so that your premiums aren’t much of a financial burden for your everyday needs and requirements.
For too long, investing in anything even remotely resembling a life insurance investment has been considered disadvantageous among investors. The uniqueness of an endowment plan, when compared to a mutual fund, thus, is that it provides a suitable mix of both security and steady returns. This is why you too should consider adding it to your portfolio.
Do you think that life insurance is a worthy investment? If yes, do explore what we, at Mirae Asset Sharekhan, have to offer you.
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