What is Endowment Plan?

An endowment Plan is designed to provide a lump sum amount after certain specified term or death of a person. The insured gets the sum assured along with bonus and guaranteed additions that accrues during the term.

Endowment Plan Meaning

Endowment plan is a type of life insurance coverage which is applicable only for specified period. Like any other Life Insurance, here also you will get assured sum after maturity and in case of death of the policy holder the nominee will be benefited by the amount. In this plan the specified period will be ten, fifteen, twenty years or up to certain age limit for which you have agreed.

Endowment Plan= Insurance + Savings

Types

Types of Endowment policies popular in the market are as follows

Unit-linked Endowment

This is a fixed term saving plan with an opportunity of life coverage. In this plan your savings can be invested in market shares thus the return you get from this completely depends upon on the performance of your investment. If you are ready to play with the market risks then this is the best option.

Full Endowments

In Full Endowment plan at the start of policy you will be assured with basic sumwhich is also equal to death benefit. However the amount you get at the end of maturity depends on the annual growth rate. Actually your premium amount will be pooled into company’s or some other investment and each year a bonus is added into your credit. Thus final amount paid to you will be usually higher than the assured fund.

Low Cost Endowment

In this endowment plan the anticipated future growth rate of the amount will meet the target amount and the guaranteed life insurance element. In case of death, this target amount will be paid as the minimum assured sum. Usually Low Cost Endowment plan is used to pay off a mortgage and this is the major advantage of this policy. However investor may increase the premium amount to collect the enough money to clear their mortgage.

Unitised with Profit Endowment

This is a form of profit endowment where the value of units is calculated annually and this value is guaranteed in order to form a minimum return amount. This guaranteed sum remains unaffected from the market risks thus giving you relief. However the guaranteed amount is less than the actual value but if you want to escape from the volatility of market this is a safe investment.

Non Profit Endowment

As the name suggests this plan does not add any bonus for the amount you pay as no sum is invested in shares. If you are looking for a policy to pay off your mortgage then this will not help you but, if you need only life coverage then you can opt for it.