Understanding Pure Endowment Plans and Their Key Features

Pure Endowment Plan : Meaning

A pure endowment plan is a type of life insurance plan where a guaranteed^* sum is paid only if the life assured survives the full policy term. This amount is fixed at the beginning of the policy and is paid out on maturity.

This plan does not provide any death benefit to the nominee if the life assured dies before the plan ends. It is a savings plan that works only if you live through the policy duration.

This plan is usually chosen by people who want guaranteed savings at a future date for specific needs like retirement or higher education. Some life insurance plans may offer an endowment plan with other benefits like a bonus (if declared) or return of premium.

Pure endowment life insurance is not affected by market volatility , ensuring your money stays protected from market changes .

Features of Pure Endowment Life Insurance

Here are the main features of a pure endowment plan:

Guaranteed^* Maturity Benefit: You get a fixed sum when you survive the policy term.

• No Death Benefit: The plan does not offer any payout to your dependents if you pass away during the policy period.
• Savings-Based Plan: It helps you build savings over a long period of time.
• 'Fixed Premiums: You pay regular premiums to keep the plan active.
• Surrender Value: Once the surrender value is accrued the policyholder can surrender the policy, subject to policy terms and conditions.
• Low Risk: It offers protection from market changes and gives assured returns.
• Bonus Options: Some plans may offer additional benefits in the form of bonuses(if declared by the insurer) along with the sum assured.

These features make it useful for people who want to save money without taking too many risks.

Eligibility Criteria for Pure Endowment Plans

To buy a pure endowment policy, you need to meet the eligibility criteria of the Insurer some of which include :

• Minimum Age: Usually 18 years
• Maximum Age: Usually up to 60 years (varies by insurer)
• Income: Some insurer may ask for income details
• Health condition: Some Insurers may ask for Medical tests to decide premium

These eligibility rules help insurance companies check if the plan is suitable for you.

What Are the Premium Payment Structures of Pure Endowment Plans?

Every pure endowment life insurance policy has a premium payment structure that you must follow to keep it active. Here are the main points:

• Regular Premiums: You can pay premiums at every year, half-year, quarter, or month during the policy term.
• Single Premium Option: Some policies may allow you to pay the full amount at a time.
• Mode of Payment: You can pay online, by cheque, auto-debit, or other accepted payment methods.

Missing a premium payment will lead to a policy lapse (if you miss paying within the grace period too).

Tax Benefits under Pure Endowment Plans

A pure endowment plan also offers tax advantages, making it even more attractive as a savings option. The premiums paid may be eligible for tax deductions under Section 80C of the Income Tax Act, 1961, up to ₹1.5 lakh in a year (applicable under the old tax regime).

This tax benefit can help you reduce your tax liability while planning for the future.

Conclusion

A pure endowment plan is a life insurance plan that helps you save money for future goals like retirement or your child’s higher education. It gives you a guaranteed^* payout referred to as sum assured at the end of the policy term if you survive the duration. This plan does not give a death benefit to your family if you die during the policy term. With benefits like disciplined savings, fixed premiums, and tax deductions, it can be a smart choice for people who want to avoid market risks and prefer a secure future fund.

FAQs

Is it good to invest in a pure endowment plan?

A pure endowment plan can be a good option if you want to build savings. It gives you a guaranteed^* payout at a specific future date. You can also avail tax benefits on the premium you pay.

What happens if the life assured dies before the end of the policy term in a pure endowment plan?

A pure endowment plan doesn’t give any payout (no death benefit is paid) in case of death of the life assured during the policy term.