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 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 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
    "Good Service"
    0.5 4.0/5 "Great!"
    I have taken life insurance policy directly through LIC agent.This was a money back policy for the tenure of 10 years .The premium is paid on quarterly basis .Each and everything was good and this policy is highly beneficial for family .I am paying the premium through cheque only.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 22, 2020
  • LIC
    LIC Life Insurance
    "Good policy"
    0.5 5.0/5 "Blown Away!"
    I have taken Life Insurance through LIC directly .This policy tenure is 20 years, will be getting some good returns. The payment mode is auto debit option. I am paying the premium on monthly basis of Rs.823 and this policy is still active on my name .I have got all the update about the policy through the agent .Even got my policy documents on time as well.This policy is highly beneficial and will be useful for me and my family.
    Was this review helpful? 1
    , kolkata
    Reviewed on Jan 21, 2020
  • LIC Life Insurance
    "Good Service"
    0.5 3.5/5 "Pretty good"
    I have taken life insurance policy directly through LIC agent .This was a term plan it is applicable till the age of 70years old.I am paying the premium on half yearly basis ,This is a death benefit plan totally useful for family members .Each and every details about the policy was clearly shared by the agent.This policy is still active and much comfortable .
    Was this review helpful? 0
    , mumbai
    Reviewed on Jan 21, 2020
  • LIC Life Insurance
    "Best policy "
    0.5 5.0/5 "Blown Away!"
    I have taken life insurance policy through LIC by an agent. This was a money back policy for the tenure of 20 years and i am paying the premium on monthly basis through online by ECS mode. I am paying Premium Rs.2800 and this policy is still active on my name.
    Was this review helpful? 0
    , kochi
    Reviewed on Jan 21, 2020
  • Tata AIA Life Insurance
    "Client communication must"
    0.5 4.0/5 "Great!"
    I have taken my life insurance policy from TATA AIA and it is a money back policy. I am not getting correct information i would request to send a mail regarding dividend every thing they should communicate. They take care of their customers concern. They take care of their schemes and also getting bonus.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 21, 2020
  • LIC Life Insurance
    "Good Service"
    0.5 4.0/5 "Great!"
    I have taken life insurance policy directly through LIC agent.This is a maturity benefit policy for the tenure of 20years ,I am paying the premium through agent as well as cheque .This policy is highly beneficial for family and this policy is still active. I am satisfied with the service so far.
    Was this review helpful? 0
    , chennai
    Reviewed on Jan 21, 2020
  • HDFC Life Life Insurance
    "Good insurer"
    0.5 4.0/5 "Great!"
    My son in law has suggested a life insurance to take from HDFC Life. So I have taken on 2 years before. It covers my whole family. It is a single payment for this insurance. I am not aware about tenure period. I got all details about this policy and got documents on time.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Good policy"
    0.5 5.0/5 "Blown Away!"
    LIC has offered a Jeevan Anandh policy. While checking terms and conditions I felt pretty happy with their schemes so I had opted for it. Last year of July I got this policy. The tenure period of 20 years. I use to pay premium amount on quarterly basis of 5,200 rupees. It covers myself. No late payment issue.
    Was this review helpful? 0
    , keonjhar
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Good policy"
    0.5 5.0/5 "Blown Away!"
    I have taken a life insurance in LIC on one year back. The policy is for 25 years. I am paying premium on quarterly package the amount of 4K which is nominal. While getting this insurance my agent has given an information about the policy details. It covers myself. It is a money back policy.
    Was this review helpful? 0
    , keonjhar
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Best policy"
    0.5 4.0/5 "Great!"
    LIC has offered a Jeevan Anand policy and i am holding since 30 years before. Now I am paying premium amount once in 3 months with the premium of 1369 rupees. While getting this policy my agent has given all information about the policy details and the coverage value of Rs. 1L
    Was this review helpful? 0
    , hyderabad
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Need policy"
    0.5 5.0/5 "Blown Away!"
    All my relation have a life insurance policy from LIC so that i have taken the policy with them. I bought the policy almost 3 years. Total term period of the policy is 15 years. I have been paying the premium amount of Rs. 30000 on a monthly basis and my friend is working as a LIC agent has referred me about this policy.
    Was this review helpful? 0
    , chennai
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Good Service"
    0.5 4.0/5 "Great!"
    I have taken Life Insurance policy through LIC agent .This was a maturity benefit policy and this policy tenure is 20 years .I need to pay the premium within 3 months .The premium is paid on through the agent.This policy is taken for family benefits. The complete process was shared by the agent.
    Was this review helpful? 0
    , thane
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Best service"
    0.5 5.0/5 "Blown Away!"
    I have taken a life insurance in LIC on 10 years back. The tenure period of policy is 19 years. I am paying premium on monthly basis and getting deduction on my salary 2480 rupees. While getting a policy my agent has given an information about the policy details. The agent has suggested this policy. So far I have not faced any issues, this covers only myself.
    Was this review helpful? 0
    , alleppey
    Reviewed on Jan 20, 2020
  • LIC Life Insurance
    "Good insurer"
    0.5 5.0/5 "Blown Away!"
    I have taken a life insurance in LIC on 4 years back. The tenure period of policy is 30 years. I am paying premium on quarterly package of 1832 rupees. While getting a policy my agent has given an information about the policy details. The agent has suggested this policy. So far I had not faced any additional charges. It covers only my daughter.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 18, 2020
  • LIC Life Insurance
    "Good policy"
    0.5 4.0/5 "Great!"
    Purchased the LIC policy in the year of 2003. I have been paying the premium amount of Rs. 735 onces in 3 months. They are giving the sum assured amount of Rs. 50k approximately. I make the payment directly as cash . Next year it is going to complete and the total term period of this policy is 18 years.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Jan 18, 2020
  • LIC Life Insurance
    "Best policy "
    0.5 4.0/5 "Great!"
    In LIC, they will give good returns and friend recommended hence I have chosen the same company for life insurance policy. I bought the Jeevan bheema in the year of 2017. Total term period of the policy is 15 years and i have completed 3 years.I am paying monthly Rs.1000 i pay the premium through the agent.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 18, 2020
  • LIC Life Insurance
    "Good Company"
    0.5 5.0/5 "Blown Away!"
    Chosen my life insurance policy from LIC and i have bought the policy 7 years before. LIC is a beneficial company for middle class people and after the term period i will be getting some bulk amount in our hand. My father has suggested me about this policy. Yearly once, i pay the premium amount of Rs. 19000. I used to make the payment through online.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Jan 17, 2020
  • LIC Life Insurance
    "Best policy"
    0.5 5.0/5 "Blown Away!"
    My life insurance policy was purchased from LIC because they have a good service. I'm paying the premium amount of Rs. 15,000 for the tenure of 20 years. Offered sum assured amount was sufficient for me. I used to make the payment in their branch and the staffs are giving good response. Its a tax covered policy.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Jan 17, 2020
  • LIC Life Insurance
    "Best policy"
    0.5 4.0/5 "Great!"
    LIC has offered a Jeevan Anand policy for myself. I have taken this policy before 10 years. The tenure period was 20 years and i am paying EMI yearly Rs. 10,000 deducting from my salary in the mode of ECS. This is a money back policy and service was good.
    Was this review helpful? 0
    , pune
    Reviewed on Jan 17, 2020
  • LIC Life Insurance
    "Excellent Policy"
    0.5 5.0/5 "Blown Away!"
    Last month i have bought the child policy for my daughter and son. I have selected the policy duration of 15 years. I pay the premium amount of Rs. 50000 per year. Everybody told that LIC company is not cheating the customer and its a Government sector company. From the agent, i got the policy and he has explained the benefits as well.
    Was this review helpful? 0
    , pune
    Reviewed on Jan 17, 2020
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