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Endowment Plans in India - An Overview

What is an Endowment Policy?

A traditional insurance plan pays out a lump sum assured in the event of the death of the policyholder. The beneficiaries/dependents/nominees of the life insured receive a benefit (called a death benefit) if the worst should come to pass for the insurance holder. An endowment plan works the same way, but has an additional clause that states that a lump sum payment will be made to the insurance holder if he or she survives till the end of a specified period known as the “maturity period”, “endowment policy term” or “survival term”. There are variations to the payout clause in endowment policies – some companies have a lump sum payout on the detection of a critical illness, or other life changing events.

Key Features of Endowment Policies:

  • Sum assured in an endowment policy is payable either on survival to the term or on death occurring within the term.
  • Endowment policies are available as ‘With Profit’ and ‘Without Profit’ plans.
  • Under Endowment policies, bonus for the full term is payable on the date of maturity or in the event of death, whichever is earlier.
  • Premiums for endowment policies can be limited to shorter term or can be paid as single premium.
  • Premiums cease on death or on expiry of the term, whichever is earlier.

Benefits of Endowment Policies:

Endowment policies carry plenty of benefits, a few of which are listed below:

  • An endowment policy will provide insurance cover during the policy term.
  • An endowment policy will pay out a sizeable lump sum amount at the end of the policy term i.e. once the policy has matured.
  • An endowment policy works to serve a dual purpose. Not only does it work as an insurance policy but also serves as a long-term investment offering decent returns.
  • Endowment policies come with tax benefits.
  • In terms of investing, endowment policies are relatively safer than other types of investments and offer returns which are close to those offered by mutual funds.
  • Endowment policies enable long-term savings.
  • With an endowment policy, you can be assured of receiving a considerable amount upon maturity.
  • Most endowment plans will extend insurance coverage and the promise of benefits even after the maturity date, in some cases up to a time when the life insured attains the age of 100.
  • Policy holders have the options of opting for additional riders which provide cover for specific illnesses, critical illnesses, disabilities, etc.

How Do Endowment Policies Work?

Endowment policies are not very different from regular insurance policies. These policies, like insurance policies, not only provide cover to the life insured, but also help them save regularly over a specific period of time. Once the policy has matured and given that the policy holder has survived the policy term, they will receive a lump sum maturity amount which can be utilized for meeting financial needs like purchasing property, children’s education, organizing a wedding or preparing for one’s retirement.

Are endowment plans for you?

The decision to take on an endowment plan must be well thought out and its benefits, returns on investment, etc. must be compared against those of similar investments.

If you are a healthy individual in need of life insurance cover and an investment that helps you save on tax in addition to giving you huge returns, you may choose to opt for a combination of financial products, or opt for a single endowment plan which does the same thing.

You may purchase a life insurance policy and invest in a separate mutual fund, etc. and expose yourself to the risks involved in a mutual fund investment. It’s quite ideal for those with a high risk appetite. For those who find that their life savings are too valuable to leave to chance, an endowment life insurance policy is ideal.

An endowment policy is far less risky than a mutual fund investment, and also has ULIP options which invest in various equity and debt schemes. In addition to being a tax saving investment with guaranteed returns at the end of the term, it also provides comprehensive life insurance cover – which is a win-win situation for the investor (and his dependents).

There are arguments against endowment plans because the returns on investment are not as high as those offered by mutual fund, equity and debt related investments of similar amounts for similar tenures. Purchasing two separate financial products – one for a life insurance policy and one for a product directed to give you returns on investment will pay off better with a higher percentage of returns. That being said, it must be noted that while there are better options for returns on investments, endowment policies are first and foremost insurance policies. They just have the added benefit of giving you a return on the premium you’ve invested – on plan maturity.

Consider your risk appetite and requirement for life insurance cover before taking any major financial decision.

Types of Endowment Policies:

There are 3 types of basic endowment policies which one can choose from.

  • Unit Linked Endowment - Under Unit Linked policies, the insurance premiums are directed into multiple units held under a specific investment fund which can be chosen by the policyholders.
  • Full Endowment – Under this policy, the basic amount ensured to be provided will be equal to the death benefit, right from the start of the policy. Depending on the speculated market-based appreciation, the final payout provided is comparatively higher.
  • Low Cost Endowment – This endowment plan has been introduced with the intention of allowing individuals to accumulate the funds which have to be paid after a specified time period, usually mortgage.

How to Choose an Endowment Policy?

Just like other insurance plans, the market is now flooded with different types of endowment policies. There are several factors which come into play, when it comes to choosing the right endowment insurance policy. Individual needs, current life stage, income and risk appetite are just a few factors to consider. Given that the premiums of endowment plans are pricier as compared to term plans, cost of premiums is also a deciding factor. After premium costs, another crucial factor to keep in mind is the insurance provider’s track record in terms of the bonus payments. Beside these, some other factors to keep in mind would be the customer service provided by the insurer, their claim settlement ratio, financial status of the insurer, etc. when choosing an endowment policy, pick one which is simple and does not come with features and benefits which are difficult to comprehend and the finer details of the policy may get lost in the fine print.

Documents Required:

In order to apply for an endowment policy, customers will mostly be required to submit basic documentation such as the following:

  • Fully filled Application form/Proposal form.
  • Photograph.
  • Proof of residence / address proof.
  • Proof of age.
  • Medical reports (only if required).

Endowment Policy Premium Calculator:

With the Endowment Plan Premium Calculator you can know the details like Premium amount, maturity value, surrender value, loan value and returns of the Policy. Endowment Policy Premium calculators will ask you to input information like your age, policy term and amount of sum assured. Using this information, the calculator will compute the premium which you will be required to pay towards your endowment policy.

Riders For Endowment Policy:

Most endowment policies offer add-ons to enhance the protection provided by the policy. Some of the riders commonly available with endowment policies are as follows.

  • Critical illness
  • Waiver of premium
  • Accidental death and dismemberment
  • Accelerated sum assured
  • Partial and permanent disability
  • Hospital cash

Some Popular Endowment Plans In India:

Reliance Endowment Plan

  • Sum Assured plus vested bonuses on maturity, subject to 100.1% of premiums paid.
  • Death benefit of 10 times the annualized premium or base Sum Assured plus vested bonuses. Either that, or 105% of all premiums paid.
  • Policy term from 10 – 25 years.
  • Loan against policy available

Kotak Classic Endowment Plan

  • A participating endowment plan providing coverage up to 75 years of the life insured.
  • Yearly bonuses applicable from the first year.
  • Wide range of term options.
  • Tax benefits under Section 80C and 10(10D) of the Income Tax Act, 1961.
  • Riders available to enhance protection.

Kotak Premier Endowment Plan

  • Receive 5% p.a. (simple) of basic Sum Assured as Guaranteed Additions during the first 5 policy years.
  • Bonuses accrue from the 6th policy year onwards.
  • Regular or limited premium paying term for 5, 7, 10 or 15 years for different term combinations.
  • 7 additional riders available.

LIC New Endowment Plan

  • Minimum sum assured of Rs.1,00,000.
  • Death benefit no less than 105% the total premiums paid.
  • Death benefit is the higher of basic Sum Assured or 10 times the Annualized premium.
  • Accidental death and disability rider available.

Shriram Life Insurance - New Shri Life

  • Life cover plus reversionary bonuses.
  • Advance premium payment option with a discount.
  • Additional protection available through riders.
  • Minimum Sum Assured of Rs.50, 000.
  • Monthly, quarterly, half yearly and annual modes of premium payment.

Endowment Policy FAQs

  1. Q.Are there any tax benefits provided by Endowment Policy?

    A. Endowment policies do offer tax benefits under Section 80C and 10 (10D) of the Income Tax Act.

  2. Q.What is the process for cancelling an Endowment Policy?

    A. The general procedure to cancel an Endowment policy requires individuals to visit their insurance provider along with the necessary documents like the original policy document, ID proof, Surrender / Cancellation Form and a cancelled cheque for the purpose of fund transfer. While the cancellation procedure may differ with each insurer, hence it is wiser to contact your insurer to get to know the procedure.

  3. 3.Q.What happens when I surrender my Endowment Policy?

    A. In the event that you are not satisfied with the endowment policy or it is not fulfilling your requirements, you are under no obligation to continue with it. Policy holders have the option of exiting their policy before its maturity term and surrendering it. If a policy holder decides to withdraw his Endowment policy before the maturity period is over, it is called surrendering the policy. If an individual surrenders his policy, then the cover provided by the policy, along with the added benefits will cease to exist. For instance, LIC allows surrender of endowment policies only after the premiums for 3 full policy terms have been paid. In case the policy holder exits and surrenders the policy before this (3 term) time period, then they will not receive any payout.

  4. 4.Q.What is meant by a paid-up endowment policy?

    A. If a policyholder has paid premiums on their policy for a minimum of 3 years, they have the option of converting their endowment life policy to a paid up endowment policy. In case you are not satisfied with the endowment policy which you’ve taken but do not wish to surrender your policy, you can choose to not pay the premiums any longer. While your policy will continue till it reaches maturity, the sum assured amount will however be reduced.


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Endowment Plans Reviews

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  • LIC Life Insurance
    "Very Good Service"
    0.5 5.0/5 "Blown Away!"
    I have taken Life Insurance through LIC Agent.The LIC agent visited office and then got the details of the life insurance and taken the policy.The policy tenure is for 15 years.I am paying the premium on monthly basis.The premium is nominal .The premium is deducted through EMI.I have received the policy documents on time.I have not faced any issues on submiting the documents.The agent clearly explained the process .The Overall Service is Good.
    Was this review helpful? 0
    , ahmedabad
    Reviewed on Mar 24, 2019
  • ICICI Prudential Life Insurance
    "Life Insurance Executives are Proactive "
    0.5 5.0/5 "Blown Away!"
    I taken a term plan in ICICI prudential for Sum assured of 1 crore till 85 years of term period . It is the normal plan with inbuilt features . Comparing with other plan it is the best plan with ICICI . Customer executives are proactive in helping for the customers .
    Was this review helpful? 0
    , mumbai
    Reviewed on Mar 24, 2019
  • LIC Life Insurance
    "Excellent service"
    0.5 5.0/5 "Blown Away!"
    I have taken Life Insurance Policy for the tenure of 25years .The LIC agent directly visited the home and taken policy.The name of the policy is a Jeevan Anand . I a m paying the premium on quarterly basis .I am paying the premium through net banking. The policy documents received on time. The agent clearly explained the process of the life insurance .Processing was simple and neat.
    Was this review helpful? 0
    , pune
    Reviewed on Mar 24, 2019
  • LIC Life Insurance
    "Two in one Benefit plan"
    0.5 4.0/5 "Great!"
    I taken this LIC plan mainly for tax exemption . After that only , I came to know it has lot of Internal benefits . I also suggest every one to take the investment plan as soon as possible .Working person need to protect his family under this type of scheme .
    Was this review helpful? 0
    , bangalore
    Reviewed on Mar 24, 2019
  • LIC Life Insurance
    "More than satisfactory"
    0.5 5.0/5 "Blown Away!"
    I had a money back policy with LIC. It is a beneficial policy. The services are good. The agent we had done a good job too. My payments was done on time. It is convenient. The policy is also matured and I got a good amount of sum assured and a good interest too.
    Was this review helpful? 0
    , ahmedabad
    Reviewed on Mar 23, 2019
  • Aegon Life Life Insurance
    "Excellent service"
    0.5 5.0/5 "Blown Away!"
    I have taken my Trem insurance with Aegon life ,the agent had clearly explain me about the plan benefits,and policy coverage, and they have given me hard copy as well, and the premium amount i have pay through on line basis, and i use to pay on yearly basis.
    Was this review helpful? 0
    , mumbai
    Reviewed on Mar 23, 2019
  • LIC Life Insurance
    "Maturity Cum Death Benefit plan "
    0.5 4.0/5 "Great!"
    I had taken Risk protection plan in LIC mainly for maturity cum death benefit plan . The tenure period is for 15 years . On quarterly basis I am paying some 20 k for a maturity of 20 lakh . I get reminder every time for making my payment on time from LIC .
    Was this review helpful? 0
    , hyderabad
    Reviewed on Mar 23, 2019
  • LIC Life Insurance
    "Good for long term"
    0.5 4.0/5 "Great!"
    Newly I have availed LIC for the saving, I am paying Rs. 15,000 on half yearly basis. I need to pay the premium for 15 years then LIC will be providing the maturity benefit and interest. The agents are perfect they disclose all the terms and condition. The payment gate way is very convenient to make my premium on time.
    Was this review helpful? 0
    , bangalore
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Excellent"
    0.5 5.0/5 "Blown Away!"
    I have life plan with LIC and it was purchased before 5 to 6 years. It was referred by the agent and I have taken a Jeevan Anand. Its a good plan and am paying 10K per annum. The payment is made through cash. I don't have access for online system which they need to consider.
    Was this review helpful? 0
    , vadodara
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Its Good"
    0.5 4.0/5 "Great!"
    I used to pay Rs 5000 in a year for my LIC policy, whenever I make then I used to to get the acknowledge about my payment details. LIC gives the reminder call to the customer to make the premium, I got the policy bond for my all the policies with LIC.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Trust Worthy"
    0.5 4.0/5 "Great!"
    I pay Rs. 25,000 in a year, its a money back policy. Every four year I get interest from the whole sum assured. Then after maturity I get the sum assured and interest. Even it has the life cover for accidental and natural death, I am very fine with them.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Good trusted schemes"
    0.5 4.0/5 "Great!"
    I pay Rs. 18,000 as a premium in a year for one policy, all are long term policy around 15 years, I need to pay the premium for the whole year then I get the sum assured and tax benefits. Even after making my payment I get the acknowledgement from their end.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Trust worthy"
    0.5 4.0/5 "Great!"
    For one policy every quarter I pay the premium around Rs. 2000 its good for the tax benefits, every four year I get the bonus amount from the sum assured value. I think the policy name is called money back. Even after the maturity period I get the sum assured.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Mar 22, 2019
  • LIC Life Insurance
    "Excellent service"
    0.5 5.0/5 "Blown Away!"
    I have taken LIC Policy directly with LIC agent since visited home .I have this life insurance policy for the tenure of 20 years and i am paying the premium yearly .The agent clearly explained the process of the policy .I have received the policy documents on time.I am payng the premium of Rs.18000.I am paying the premium through debit card and also through cash payment as well.The Overall Service is Good .
    Was this review helpful? 0
    , new delhi
    Reviewed on Mar 22, 2019
  • Reliance Life Life Insurance
    "Good Insurer"
    0.5 4.0/5 "Great!"
    Yearly I pay the premium of Rs. 3406 it has the term of 15 years. I took the cash back policy, every 3 years I get around Rs. 7000 as bonus interest, the benefits are good it helps to save my tax and they have life coverage for certain demise. After 15 years I get good sum assured, even I got my policy bond.
    Was this review helpful? 0
    , bangalore
    Reviewed on Mar 21, 2019
  • LIC Life Insurance
    "Return and maturity plan"
    0.5 4.0/5 "Great!"
    In LIC , i got a very good maturity plan from the Agent . For every three months , I need to pay an amount of Rs 8000 /- for next 10 years and from the 11th years onwards, LIC will provide the maturity amount for next 10 years . I fine this plan and it is very much helpful in future.
    Was this review helpful? 0
    , mumbai
    Reviewed on Mar 21, 2019
  • Reliance Life Life Insurance
    "Need scope of improvement"
    0.5 3.0/5 "Satisfactory"
    I have life insurance policy with Reliance, I believe the customer support is not upto the mark. I told them while getting the policy activation my ecs should be after 15th but they deducted money on 13th. Its not fair, premium is low for the term of 12 years. The tax benefits and life coverage are good.
    Was this review helpful? 0
    , chennai
    Reviewed on Mar 21, 2019
  • Kotak Life Life Insurance
    "Good Life insurance"
    0.5 5.0/5 "Blown Away!"
    I have invested in Kotak old mutual life insurance which provided by my company, the premium get deducted automatically from my salary account. The term was printed in my offer letter, after certain period I get some benefits., they have good tax benefits and life cover.
    Was this review helpful? 0
    , new delhi
    Reviewed on Mar 21, 2019
  • LIC Life Insurance
    "Trustworthy"
    0.5 5.0/5 "Blown Away!"
    I have one term plan with LIC and it was taken because this company is good in India. They have explained me about the policy terms and conditions. I make the premium quarterly 3K through online. It was taken for future benefits but the benefits are not very good.
    Was this review helpful? 0
    , new delhi
    Reviewed on Mar 20, 2019
  • LIC Life Insurance
    "GOOD"
    0.5 4.0/5 "Great!"
    I have purchased the life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA and i have been using it from last 5-6 years. It gives the life coverage for family also the premium i am paying for 3 months once with this policy. I hold the money back plan with this insurance policy.
    Was this review helpful? 0
    , gudivada
    Reviewed on Mar 20, 2019
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