When browsing through life insurance plans, you must have often wondered if there’s any insurance product that combines the benefits of an insurance policy with savings opportunities. Well, Traditional endowment plans do just that. Traditional Endowment policies are insurance-cum-investment plans that offer you a life cover as well as an opportunity to save for the future.
The premiums you pay for such plans help build a corpus that’s given to you after the end of the policy tenure as a maturity benefit. However, in the event of your untimely demise during the policy term, death benefit –coupled with other bonuses (if any) on the principal sum assured amount- is paid to your listed nominee as per policy terms & conditions.
While the benefits that these plans offer are truly myriad, you must first check if you’re eligible for such plans.
Eligibility Criteria for an Traditional Endowment Policy
1. Minimum and Maximum Age Caps-
Most endowment plans have no lower age limit specification, but some plans consider 18 years as the basic age to qualify for such policies. The maximum eligibility age for such plans stands at 60 years, which may also vary from product to product. Thus, while you can even buy an endowment savings plan to safeguard the future of your newborn child, you can also adequately secure your retirement years with such plans.
2. Maturity Age-
You will be able to reap the benefits of such plans as soon as you turn 18. The funds from such an endowment policy can be used for various purposes, some of which includes - to fund your higher education aspirations, can be used as seed money for your own business venture etc.
When Should You Opt for a Traditional Endowment Plan?
While you might qualify under the above-listed eligibility criteria, it is important to thoroughly examine if a traditional endowment policy is the suitable option for you. Traditional Endowment plans are suitable solutions in the following circumstances:
When You Want to Protect the Financial Future of your Family
Traditional Endowment savings plans are preferable ways to build up a sizable corpus to help fulfil the needs of your dependents, irrespective of whether you’re present or absent. For instance, if anything untoward were to happen to you as the sole earning member of your family, your family’s financial future would be in serious peril. However, the death benefit payout from such plans helps cover the expenses of your dependents, ensuring their financial stability.
Similarly, with the rising inflation rates, you may want to start saving for your children’s wedding way ahead of time. By opting for a traditional endowment savings plan, you can deposit small amounts at your preferred pace to build a sizable maturity corpus (with additional benefits like bonus, if any) that can be used 10 to 15 years down the line to pay for such events.
When You Want to Ensure that your Child Achieves his/her Higher Education Goals
As a parent, you would want nothing more than to fulfil the educational aspirations of your kids. You wouldn’t want to see their dreams and aspirations crushed due to a lack of funds. With the growing expenses, it can be difficult to save up for your children’s higher education dreams.
However, with a traditional endowment plan, you can plan to achieve this life goal. The sum assured plus bonuses (if any) that you receive on maturity from such long-term savings plans can be used to fund your children’s education so that they can pursue their dreams without any obstacles.
When You Wish to Save for a Comfortable Retirement
Saving up for your retirement years is not just prudent but also a necessity. Since you have to meet regular expenses as well as tackle sudden contingencies during your years in service, the money that you earn during these years may not be enough to create a sizable retirement fund.
This is where traditional endowment saving plans come in handy. The piece-meal savings you dedicate to such plans, over say 10 to 15 years, are returned to you with guaranteed benefits which is the sum assured along with bonuses (if any) at the end of the policy tenure. Thus, you get to enjoy a retirement corpus that lets you comfortably and independently cruise through your retirement years. Take the aid of a retirement calculator for further assistance.
When You Are Looking for a moderately Risky Way of Creating Wealth
If you’re averse to high-risk products, but at the same time want to make return on your investment, a traditional endowment policy can be an option to consider. The guaranteed returns clause i.e. the sum assured coupled with bonuses (if any) ensures that you create a corpus without having to navigate the volatile markets.
This feature makes such plans suitable for investors with medium-risk appetites. Moreover, apart from the sum assured in the policy, you also get to enjoy cumulative bonuses, if any declared by an insurance company. Some policies also offer you rebates when a high sum assured is selected. All this makes such plans attractive wealth creation option to consider.
Wrapping It Up
Traditional Endowment policies let you save for the well-being of your family as well as prepare for any future emergencies that may arise. The life cover provided by such plans extends a blanket of financial security over your dependents, while its sizable maturity corpus helps you plan for the future of your family as well as your retirement.
Additionally, you get to enjoy tax benefits on your premium contributions under Section 80C of the Indian Income Tax Act, 1961, subject to provisions stated herein.
While a Traditional endowment policy is a prudent insurance -cum- investment option for many, you can assess if it fits your requirements by first analysing your life goals. If your life goals align to any or all of the scenarios highlighted above, you can definitely consider opting for a Traditional endowment plan.
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