One answer to this is that endowment life insurance plans promise guaranteed returns while mutual funds, like all equity instruments, are vulnerable to uncertainty. It would be useful to take a closer look at the advantages of life insurance, as provided by endowment plans, compared to those of mutual funds.
Before one begins comparing their features and advantages, it’s necessary to understand what these products are.
A mutual fund, as you must be aware up to a point, is an investment that draws many investors to invest in a mix of securities, such as shares and bonds.
On the other hand, endowment plans are life insurance investment plans wherein an investor is entitled to life insurance cover for a period of time (can opt for up to age 100) as well as a fixed rate of return on its maturity. You can also dive deeper to know how endowment life insurance plans actually work.
Thus, on one hand, you are investing in securities that may or may not be faring well when you want to divest your investments. On the other hand, in the case of an endowment policy, you get guaranteed returns your family get a financial safety net significant tax benefits.
Since most investments made these days are geared toward the two-fold advantages of returns and savings on taxes, endowment life insurance plans score over mutual funds in this aspect as well. Most mutual funds are subject, like any other equity investment, to taxation at fixed (and high) rates. However, endowment plans allow their investors to claim deductions worth up to Rs. 1.5 lakhs for all the premiums that have been paid, as long as these are filed as per the old tax regime.
Even though mutual funds have certain benefits, an endowment policy would fare better in comparison because of some crucial advantages of life insurance that they offer to the insured person. The most important of them is the fact that this life insurance investment promises guaranteed returns at a stable rate, whereas there is no such certainty in a mutual fund.
Moreover, endowment plans also provide life insurance meaning financial security for the insured’s family in the undesirable event of his or her untimely demise. Therefore, it is not only beneficial but also essential for a person to have an endowment plan in their financial portfolio. It’s just good Wealth Management.
Other insurance investment options like term insurance are becoming popular these days. You can find out if they are worth the hype as well.
Wish to know more about life insurance in general? We can help you level up your knowledge too!
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