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Things To Know About Endowment Policies

Life insurance policies are designed to cover the financial risks that arise in the case of a premature demise. However, there are other aspects of life insurance policies that help in the fulfilment of financial goals. Life insurance plans come in different variants, and if you choose savings-oriented policies, you will be able to create a corpus as well as enjoy life insurance protection.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Endowment insurance plans are type of savings-oriented life insurance plan that help you create a secured financial corpus for your goals and also provides life insurance coverage. Let’s understand endowment plans in detail –

 

What are Endowment Plans?

 

Also called traditional savings plans, endowment plans are non-linked policies that do not invest your premium in the financial markets. Instead, these plans offer a secured corpus on premature demise or maturity1.

 

Features of Endowment Plans

 

Some of the salient features of endowment plans are as follows –

1. Assured Benefits

Endowment plans pay assured benefits on premature demise or maturity. The plan specifies the benefits when you buy it. As such, those of you looking for a plan that is not exposed to market risks can opt for the endowment policy.

2. Participating and Non-Participating Plans

Endowment plans are offered as two main types – participating or with profits plans and non-participating or without profit plans. Let’s understand what each of these plans means –

▪ Participating Endowment Plans

Participating endowment plans are those that participate in the profits of the insurance company. If, in a financial year, the insurance company earns profits, a part of the same may be distributed among the policyholders, at the sole discretion of the insurance company, in the form of a bonus.

▪ Non-Participating Endowment Plans

In a non-participating endowment plans, the policyholder does not participate in the profits of the life insurance provider. However, there are death benefits and maturity benefits.

3. Different Types for Different Goals

Besides participating and non-participating endowment plans, you can segregate these plans based on your financial goals too. Have a look at some of them –

▪ Child Insurance Plans

Under such endowment plans, you can create a secured savings corpus for your child’s future needs. Some child plans come with a premium waiver benefit, wherein the future premiums are waived off if the parent passes away during the policy tenure.

▪ Whole Life Plans

Under whole life plans, coverage is allowed till 99 or 100 years of age. On death during the tenure, the death benefit is paid, while on maturity, the maturity benefit is paid under some plans, subject to policy terms & conditions.

▪ Money-Back Plans

Money back plans are endowment plans but with a difference. Under these plans, a part of the sum assured is paid regularly during the policy tenure. On maturity, the remaining sum assured is paid, while on death, the full benefit is paid irrespective of the money back benefits already received.

4. Additions Under the Plan

Endowment plans can offer different types of additions to enhance the corpus. These include loyalty additions, wealth boosters, etc. subject to the terms & of the policy.

5. Benefit Payout Options

Under some endowment plans, you get the option to receive the death and/or maturity benefit in instalments rather than in a lump sum. This helps you create a regular stream of income for your financial needs.

6. Premium Payment and Policy Tenure

The policy tenure under endowment plans usually starts from 5 years and can go upto 99 or 100 years of age (under whole-life plans). When it comes to premium payments, you might find flexible options like the following –

  • Regular premiums – premiums payable throughout the chosen policy tenure
  • Limited premiums – premiums payable for a limited tenure
  • Single premium – premium paid at once when buying the policy

7. Policy Loan

Being savings-oriented, endowment plans may allow the facility of loans under the policy. You can get a loan against the surrender value and meet your financial needs. The loan, however, carries an interest rate, and non-payment of the loan might result in foreclosure2 of the policy wherein the coverage is terminated.

8. Tax Benefits

Lastly, endowment plans also have a tax advantage. Here are the tax benefits that you can claim –

  • Premium paid for the endowment plan is allowed as a deduction under Section 80C of the Income Tax Act, 1961. Above Tax benefits are available only if Old regime of Taxation is opted. The limit of deduction is Rs.1.5 lakhs with the following conditions –
    • If you bought the policy on or before 31st March 2012, a premium of up to 20%3 of the sum assured is allowed as a deduction.
    • If you bought the policy on or after 1st April 2012, a premium of up to 10%3 of the sum assured is allowed as a deduction.
    • If you bought the policy on or after 1st April 2013 and you suffer from a disability defined under Section 80U or an ailment defined under Section 80DB, a premium of up to 15%3 of the sum assured is allowed as a deduction.
  • The death benefit received from the policy is always tax-free4.
  • The maturity benefit received is also tax-free under Section 10(10D)4 provided the premium is 20% / 10% / 15% of the sum assured, as mentioned earlier.

Further, any non-linked policy/policies issued on or after 1 April 2023 with annual premium payable of more than Rs. 5 lakhs (excluding GST), proceeds from such policies will be taxable and income from such policies will be treated as “Income from Other Sources”. If the annual premium is less than Rs. 5 lakhs, income from such policy will continue to be tax free in the hands of policyholder subject to satisfaction of Section 10(10D) of Income Tax Act, 1961 conditions.

There is no change in tax treatment for existing policies issued before April 1, 2023. For such polices, if the total premium is more than 5 lakhs, a policyholder is entitled to get all the erstwhile tax benefits, and maturity / surrender /Income benefit proceeds from them will remain tax-free provided the other conditions under Section 10(10D) are satisfied.

So, understand what endowment plans are all about and their important aspects. You may buy these plans to create a secured financial corpus for the different financial goals that you might have and also save tax in the process.

Reference

1. https://www.insuranceinstituteofindia.com/downloads/IC38/ALEnglish.pdf (Page 146)

2. https://www.insuranceinstituteofindia.com/downloads/IC38/ALEnglish.pdf (Page 252)

3. https://incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf

4. https://www.livemint.com/money/personal-finance/how-life-insurance-policies-are-taxed-11665145664260.html

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Savings and Investment Guide

Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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Long term investment plans - What Are Their Benefits?

A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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A suitable financial plan may be defined by its components. Amongst other things, one aspect, it may be incomplete without, is a steady amount of investment.

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#Survey conducted by brand equity – Nielsen in March 2020

~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

**Past performance is not indicative of future performance.

IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. Investment in ULIPs is subject to risks associated with the capital markets. The policy holder is solely responsible for his/her decisions while investing in ULIPs.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and Bajaj Allianz Life Goal Assure II - A Unit- Linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L180V02) is only the name of the unit linked insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.For more details on risk factors, terms and conditions, please read sales brochure carefully before concluding a sale.

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Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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^Subject to Section 10 (10D) conditions i.e. aggregate annual premium for ULIP policies issued on or after 1st February 2021 does not exceed Rs. 2.5 Lakhs.

1Minimum premium mentioned is applicable for Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01) and is subject to policy terms and conditions.

#Source: https://economictimes.indiatimes.com/investments-marts/eight-crucial-numbers-to-ensure-financial-success/10-times-the-annual-income-is-your-life-insurance/slideshow/16699748.cms . Subject to availability in Bajaj Allianz Life ULIP Plans. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

*Benchmark: Nifty 500 Multicap Momentum Quality 50 Index past 5 CAGR Returns, as on 31st December 2024. Past returns of a fund are not necessarily indicative of the future performance of the fund. | Please consult the financial advisor before investing.

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V01), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V01) are only the name of the unit linked insurance contracts and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

Nifty 500 Multicap Momentum Quality 50 Index Fund is available Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V01), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V01)

In addition to the already existing funds, Nifty 500 Multicap Momentum Quality 50 Index Fund is now available with the above mentioned products. Customer has an option to choose from other available funds apart from Nifty 500 Multicap Momentum Quality 50 Index Fund.

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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