Fixed Deposits and traditional endowment policies generally offer assured returns oninvestment at negligible risk. A corporate fixed deposit can get more interest than banksoffer. You can save tax and use the fixed deposit to take a loan as well. An FD also has aflexible tenure that helps you achieve your financial goals efficiently.
Whereas an endowment policy is a type of life insurance policy designed to pay a lump sumon maturity or on death. An endowment policy can be used to build a risk-free savingscorpus, while providing financial protection for family in case of an unfortunate event. Thissimplicity of an endowment plan has over the years made it an attractive savings plan forall.A good endowment policy provides you with the confidence to meet any financialemergency in the future. It provides you with returns that can help you meet your non-negotiable life goals, such as your child’s education or marriage, fulfilling the needs andaspirations of your loved ones and yourself, and more.
Benefits of an Endowment Policy
Assured Maturity Benefit / Annuity - As long as you pay timely premiums and keep the endowment policy active, the maturity benefit is intact. This is a guaranteed maturity benefit~6 amount that will enable you to meet your financial goals. This maturity benefit depends on the policy term, policy premium, premium payment term, age, and gender. You may get guaranteed additions7 on maturity in some policies. Apart from this, in participatory policies, you may also get Accrued Reversionary bonuses and Terminal bonuses
Life insurance benefit - Your loved ones are always taken care of. The life insurance benefit gives a lump sum pay-out, ensuring that even in your unfortunate absence your family members are able to continue the life you so carefully planned for them. This is a fixed amount and is given to your nominee/legal heir. Do remember some policies also give guaranteed additions and Reversionary Bonus which are considered in the calculation of death benefit
For instance, a 35-year-old person buying HDFC Sanchay pays ₹ 30,000 annual premium for a sum assured on death# of ₹ 3 lakh. So, they are getting 10 times sum assured for the premium.
Low risk - An endowment policy is usually a low-risk investment. Your money grows over time with most endowment products and your returns are guaranteed
Dual purpose - You get to enjoy the dual benefit of insurance as well as investment. Your savings continue to build over time and your family stays secure in the case of an unfortunate event
Tax benefit1 - Endowment insurance plans also offer tax benefits1. The premiums you will pay can help you reduce your taxable income under Section 80C of Income Tax Act1. There are tax benefits available on maturity of endowment policies as well. This helps you save tax at the time of inception of the policy and accumulation stage, and also the maturity stage
Loan benefit - Endowment policies can help you use them to get a loan. After a policy acquires a surrender value you can take a policy loan. The interest charged on such loans is quite competitive. For instance, some ICICI Prudential traditional plans offer a loan amount of up to 80% of the surrender value. The loan benefit helps you arrange funds in emergency and when all other routes of collecting funds are blocked