Frequently Asked Questions about Endowment Plans
An endowment plan is a type of life insurance policy that combines
insurance coverage with
savings. It provides a lump sum payout upon maturity or in the event of the
policyholder's
death during the policy term.
Endowment plans are suitable for individuals looking for a combination
of life insurance and
savings. They are ideal for those who want to ensure financial security for
their family while
also saving for future financial goals, such as children's education, marriage,
or retirement.
The policyholder pays regular premiums over a specified term. If the policyholder survives
the term, the maturity benefit, which includes the sum assured and bonuses, is paid out. If
the policyholder dies during the term, the death benefit is paid to the nominee.
Benefits of an endowment plan include:
o Life insurance coverage
o Maturity benefit if the policyholder survives the term
o Death benefit in case of the policyholder's demise during the term
o Potential for earning bonuses
o Tax benefits on premiums paid and on the maturity/death benefit
o Life insurance coverage
o Maturity benefit if the policyholder survives the term
o Death benefit in case of the policyholder's demise during the term
o Potential for earning bonuses
o Tax benefits on premiums paid and on the maturity/death benefit
A term insurance plan provides only life insurance coverage with no maturity benefit, while
an endowment plan offers both life insurance coverage and a savings component, providing
a maturity benefit at the end of the policy term.
Bonuses in endowment plans are additional amounts declared by the insurance company,
based on the company's performance and profits. They can include reversionary bonuses
(added to the sum assured) and terminal bonuses (paid at maturity or on death).
Premiums for endowment plans are determined based on factors such as the policyholder's
age, health, lifestyle, sum assured, policy term, and the chosen premium payment mode
(monthly, quarterly, annually).
Yes, premiums paid for endowment plans are eligible for tax deductions under Section 80C
of the Income Tax Act, up to a maximum limit of ₹1.5 lakh per financial year. Additionally,
the maturity benefit and death benefit are tax-free under Section 10(10D), subject to certain
conditions.
Yes, many insurers allow policyholders to take loans against their endowment plan. The loan
amount is typically a percentage of the surrender value of the policy. Interest is charged on
the loan amount, and the outstanding loan balance is deducted from the maturity or death
benefit.
If you miss a premium payment, most insurers provide a grace period (usually 15-30 days)
during which you can pay the overdue premium without penalties. If the premium is not
paid within the grace period, the policy may lapse. Some policies offer a revival period
during which you can reinstate the policy by paying the overdue premiums and any
applicable interest.