Susheela Devi, a government school teacher, is the mother of a one-year-old daughter. For her daughter’s higher education, she wants to buy a life insurance policy in which she would get a lump sum amount by investing little bit every year. An endowment plan can prove to be a better option to fulfil Susheela’s objective.
Endowment is a traditional life insurance plan that is a mix of both savings and insurance. Insurance companies sell these policies under different names. Which insurance plan would be better for you? For this, it is important that you get full information about that policy.
In endowment insurance plan, if policy holder is alive till maturity, then, he will get back all premiums paid along with the bonus. This will constitute the total sum assured of the policy.
If the policyholder dies before maturity, the nominee will get the insurance cover. From this viewpoint, the endowment plan in life insurance is free from any risk. This means, you will get money in every situation. But for this, it is necessary to pay the premium regularly
Insurance expert Vikas Singhal says that those who do not have good knowledge about mutual funds and stock markets, life insurance endowment plan is a good option for them. You can add a large amount of money by depositing annual premiums. Through this initiative, the family will also get financial security.
If Susheela comes under the tax net, she can also take advantage of tax deduction on annual premium under Section 80C of income tax act. But before choosing an insurance policy, she should consider some basics.
Homework imperative
Do not blindly trust the agent’s words while buying an insurance policy. Do a thorough homework about the merits of whatever policy is being sold to you. Insurance agents usually say that you will get maturity benefits to the tune of 8% percent of annual return. But you will not get this return in reality. You should take expert’s opinion on this matter.
There is no doubt that a life insurance endowment plan is a good option for long-term investments. This plan gives you dual benefit of investment along with insurance. premium depends on the amount of insurance cover, age and health of the policy holder. However, term insurance plans are the cheapest and best option to cover financial risks. Those who want insurance cover without the hassle of savings or investment should buy a term plan.
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