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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  • Edelweiss Tokio Life Insurance
    "Good"
    0.5 4.0/5 "Great!"
    I do have a policy with EDELWEISS TOKIO LIFE INSURANCE and the total tenure period is 15 years. They are charging premium 20,000 rupees for a year. The payment mode is cash and its easy to pay it. The benefits are really good and opted for future savings.
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    , visakhapatnam
    Reviewed on Sep 17, 2019
  • Reliance Life
    Reliance Life Life Insurance
    "Better"
    0.5 3.0/5 "Satisfactory"
    I have taken a cash pro policy and the main thing is every 4 years, I will be receiving good return. The response was very low nowadays, I would suggest them to improve the service. The benefits are average. They have charged me around 15K per annum.
    Was this review helpful? 0
    , visakhapatnam
    Reviewed on Sep 17, 2019
  • LIC Life Insurance
    "Satisfactory"
    0.5 5.0/5 "Blown Away!"
    LIC is best for life insurance policy when I compared with other insurance company benefits. I have taken a Child plan for my daughter and son. The sum assured is nearly about 10L. I need to pay the premium of 18K yearly through online. The customer service is good.
    Was this review helpful? 0
    , visakhapatnam
    Reviewed on Sep 17, 2019
  • Reliance Life Life Insurance
    "Good"
    0.5 5.0/5 "Blown Away!"
    I am paying premium of 50K per year through online. I have availed a term plan which is also same as money back. Reliance is doing better service. If any accidental or death happens, my family will be getting the maturity amount. It was taken 3 years ago.
    Was this review helpful? 0
    , faridabad
    Reviewed on Sep 17, 2019
  • Bajaj Allianz Life Life Insurance
    "Good"
    0.5 4.0/5 "Great!"
    I have taken a life policy from Bajaj Allianz because the services are good. They have charged me 6K per month and need to pay for 10 years. I got the insurance paper. I never interacted with the customer care. The benefits are good. After maturity, I will receive near about 6.15L. The payment mode is online.
    Was this review helpful? 0
    , faridabad
    Reviewed on Sep 17, 2019
  • LIC Life Insurance
    "Satisfactory"
    0.5 5.0/5 "Blown Away!"
    I have taken one life insurance policy with LIC before 3 years. I am paying the premium half yearly 8,900 rupees through online. The payment mode is convenient for me. I have no problem with the customer service. Its a long term plan and the tenure period is 20 years.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Sep 17, 2019
  • ICICI Prudential Life Insurance
    "Good"
    0.5 5.0/5 "Blown Away!"
    I am having a good relationship with ICICI BANK so I have taken life plan from ICICI Prudential. I need to pay the premium for 7 years and the maturity is 10 years. I am paying monthly 5K through auto debit and am not sure about the benefits. I got the insurance paper.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Sep 17, 2019
  • Max Life Insurance
    "Good"
    0.5 4.0/5 "Great!"
    The payment mode is online and making the premium through debit card or credit card. I have taken short term life policy with MAX LIFE. The benefits are good. They have provided me a life cover of 12L with the locking period of 5 years. I have not gone through the documents so cannot tell about this policy much. Their claim settlement rate is good and giving 98.8%.
    Was this review helpful? 0
    , new delhi
    Reviewed on Sep 16, 2019
  • LIC Life Insurance
    "Excellent"
    0.5 5.0/5 "Blown Away!"
    I am paying a premium of 1.90L yearly for overall my life insurance policies which I have taken it for myself, wife and children with various insurer including LIC. I have taken a policy coverage of 30L approx more than 6policies. LIC is okay and they are providing reminder msg alert for the premium. The customer service is not that effective. All are conventional policy for the security of my family.
    Was this review helpful? 0
    , new delhi
    Reviewed on Sep 16, 2019
  • Kotak Life Life Insurance
    "Good"
    0.5 5.0/5 "Blown Away!"
    I have taken a personal accidental policy with Kotak Life because the benefits are good. They have charged me reasonable premium for 5L policy. The customer service and response was always excellent. The payment mode is online. I got the insurance paper through postal.
    Was this review helpful? 0
    , chennai
    Reviewed on Sep 14, 2019
  • LIC Life Insurance
    "Good Policy"
    0.5 4.0/5 "Great!"
    My life insurance was taken from LIC. My relative has recommended me about this policy. I pay the premium amount of Rs. 600 in every quarter. Total term of the policy is 15 years. I get a sum assured amount of Rs. 1.5 lakhs. I used to visit the branch for making the payment.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Sep 14, 2019
  • LIC Life Insurance
    "Average"
    0.5 3.0/5 "Satisfactory"
    I have 2 life insurance policies with LIC with the coverage of 50K to 1L. The plan duration is 20 years. The policy name is Jeevan Jothi. The benefits are not good. I am paying the premium 1,500rupees half yearly for 50K and other policy is 2400 rupees for 1L. The payment mode is cash.
    Was this review helpful? 0
    , hyderabad
    Reviewed on Sep 14, 2019
  • LIC Life Insurance
    "LIC is a good life insurance policy"
    0.5 5.0/5 "Blown Away!"
    My father has recommended me about the life insurance policy from LIC. I'm paying the premium for every quarter. This is a 25 years term policy. I have been paying the premium amount of Rs. 7500. I'm satisfied with the sum assured amount of Rs. 5 lakhs. Directly i visit the branch office for making the payment.
    Was this review helpful? 0
    , bangalore
    Reviewed on Sep 14, 2019
  • LIC Life Insurance
    "Satisfactory"
    0.5 5.0/5 "Blown Away!"
    I have a JEEVAN ANAND policy with LIC which have started in the 2013 August. Yearly, am paying Rs.28,000 before I used to pay through cash or cheque and now doing it online which is easy and convenient rather going to the office. The duration of the policy is 20 years.
    Was this review helpful? 0
    , mumbai
    Reviewed on Sep 14, 2019
  • SBI Life Life Insurance
    "Policy is Good"
    0.5 4.5/5 "Excellent!"
    15 years back, i bought the life insurance policy from SBI LIFE. Actually my salary account is lying with SBI and they have approached me hence i bought the policy from them. I have paid the premium amount of Rs. 35000 which is a one time payment. This is a 13 years term policy. Sum assured amount is Rs. 1 lakhs.
    Was this review helpful? 0
    , kolkata
    Reviewed on Sep 12, 2019
  • LIC Life Insurance
    "Suitable policy for every family"
    0.5 5.0/5 "Blown Away!"
    Purchased my life insurance policy from LIC. One of friend engaged with insurance business since he approached me, i bought the policy from him. This is a tax benefits policy. I am paying the premium amount of Rs. 4000 every month. In the year of 1996, i have bought the plan and i make the premium through online.
    Was this review helpful? 0
    , kolkata
    Reviewed on Sep 12, 2019
  • LIC Life Insurance
    "Excellent"
    0.5 5.0/5 "Blown Away!"
    I have taken a life insurance in LIC on 5 years before. The policy is for 20 years. I am paying premium in the half yearly package. While getting a policy my agent has given an information about the policy details. I use to do payment through an online.
    Was this review helpful? 0
    , mumbai
    Reviewed on Sep 10, 2019
  • LIC Life Insurance
    "Best Service"
    0.5 2.0/5 "Expected more"
    I have taken LIC policy directly through the agent .The name of this policy was Bhartiya Jeevan Bhima policy .This policy premium os paid on montly mode.I am paying te premium amount of Rs.615.The agent gave all the required information about the policy details very clearly .I am paying the premium through online as well as agent .
    Was this review helpful? 0
    , jaipur
    Reviewed on Sep 10, 2019
  • Kotak Life Life Insurance
    "Moderate"
    0.5 3.5/5 "Pretty good"
    I have a life insurance with Kotak General and it was referred by a friend. I don't have customer service experience and never compared the benefits. I have paid almost Rs.3500 for a quarter. The policy coverage is 10 years and the benefits are okay.
    Was this review helpful? 0
    , bangalore
    Reviewed on Sep 10, 2019
  • ICICI Prudential Life Insurance
    "Very Good Policy"
    0.5 5.0/5 "Blown Away!"
    My company has provided me a life insurance policy from ICICI Prudential. Its a life insurance policy which gives for the customer who takes the loan. This policy has a coverage value of Rs. 10 lakhs. I'm paying the premium amount of Rs. 5000 and i have chosen the annual payment mode.
    Was this review helpful? 0
    , coimbatore
    Reviewed on Sep 10, 2019
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