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What makes Endowment Plans the Preferred Savings Tool?

In every aspect of life, today, individuals are faced with uncertainty, and this is mainly related to finances. The crux of the matter always has to do with financial security, as you require money to meet any emergency. Whether you are coping with growing inflation rates, high costs of living, job cuts, or medical emergencies, financial security should be your priority. If you have a family, you must show responsibility for your family’s financial protection so that you and your loved ones remain secured from the unpredictability’s of life. An endowment plan could be one of the solution to your financial problems.

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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The most tried and tested way to see you through financial upheaval is to have a corpus accumulated. This translates to savings that you have gathered over a period and the returns on it. With savings, you can be assured of a pool of wealth when you require it. Savings can be used for planned requirements as well as emergencies. While opting for any methods of saving, you will obviously search for a product depending on your risk-taking appetite. There are several investment products out there, but if your risk appetite isn’t too robust, then a Traditional endowment policy could be the suitable choice. This assures you of a balanced savings plan combined with an insurance scheme. A Traditional endowment plan gives you a death benefit, tax benefit, and flexible ways to make premium payment depending up on the product terms & conditions. Hence, there is some merit in exploring these plans further and knowing why they are becoming so popular.

 

What’s making Traditional endowment plans a preferred savings tool?

 

A Traditional endowment plan is a goal-based plan that helps you save. You are able to acquire a large enough corpus, spread over a long duration. You can receive this sum as a lump sum amount on maturity of your policy or as an income, depending on the product opted. The aspect that makes Traditional endowment plans so popular is the fact of gradual wealth accumulation over time.

If you start early, you can collect a substantial corpus by mid-life. Different individuals have varying financial objectives that range from a child’s marriage to education or purchasing a home. Several individuals sign up for a Traditional endowment policy to plan for their retirement. The flexibility of such a plan, to use funds to meet your needs, makes this a much sought-after savings product.

Besides offering you a financial base, Traditional endowment plans help compulsive spenders to grow their savings in a disciplined way. If you allot a part of your earnings to such a plan as a mandatory action, you are assured of savings when your plan matures. This permits you to save a certain amount, instead of spending it had you not put it into your plan. The additional benefit of a Traditional endowment savings plan is that it offers a death benefit to a nominee mentioned in the plan. In case of an unfortunate demise of a policyholder, a lump sum is assured as a payout to a nominee basis policy terms & condition.

 

One of the preferred investment Option is a Traditional Endowment Plan with Different Benefits

 

With a variety of Traditional endowment plans flooding the market today, which should you opt for? While signing up for any financial product, it's a good idea to evaluate your own requirements and how the plan will serve you in the best possible way. You must factor in your distinctive requirements, present life stage, risk appetite, income and any potential future circumstances related to finances. Generally, any Traditional endowment policy should give you overall benefits, and these are listed below:

  • Choose a plan that gives you the benefit of a regular income, or an amount in a lump sum when you need it.
  • Particular Traditional endowment plans give you the options of riders, such as coverage for disability due to accidents, critical illness cover, etc, on payment of an additional premium amount.
  • Every Traditional endowment plan will give the insured a “free look period”. This is for 15 /30 days depending on the mode of purchase of the policy. You can opt out of the policy during this period if you don’t agree with the terms & conditions of the plan.
  • Premiums paid under Traditional endowment plans are exempt from any tax as per Section 80C of the Income Tax Act, 1961 subject to provisions stated therein.

 

Conclusion

 

Peace of mind where finances are concerned should be your goal. Investing in a Traditional endowment plan has advantages for you, helping you to save, while planning for the future. There may also be risk involved when you opt for a Traditional endowment plan. However, it is lower as compared to a market linked product. With a corpus being collected, you can plan important aspects of your life and make decisions accordingly. A Traditional endowment plan offers benefits for you and your family, securing their financial future even in your absence. Whether you're just getting started with investing or a seasoned investor, an investment calculator can help you figure out how to reach your objectives. It can show you how your original investment, contribution frequency, and risk tolerance all effect the way your money grows.

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~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.

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


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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%.

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