The Indian consumers were not upbeat about only securing the life of the insured , they wanted more than just an ordinary insurance cover, this led to the beginning of an era which not only tripled insurance sales for companies but brought about additional benefits for the consumer as well in the form of an Endowment plan.
Endowment plan works as a combination of insurance and investment. In an Endowment Policy, the sum assured is payable even if the insured survives the policy term. If the insured dies during the term of the policy, the insurance firm has to pay the sum assured like any other pure risk cover. The life of the individual taking the policy is insured for a certain amount. This life cover is known as the sum assured. Endowment Policy combines the risk cover with financial savings.
Historically endowment policies have been the most popular policy in the world of life insurance. This is because people still consider "endowment plan” as an investment rather than "pure insurance".
A pure endowment policy is also a form of financial saving, whereby if the person covered survives beyond the tenure of the policy; he gets back the sum assured with some other investment benefits. Endowment policy’s maturities period varies from ten, fifteen or twenty years up to a certain age limit.
The money that is invested generates a certain return every year. This return may be declared as a bonus. The bonus is typically generated as a certain proportion of sum assured or life cover as it is popularly known. However, the bonus declared does not compound it, but only accumulates over the life of insurance. Thus, returns are low.
For example- if an individual taking the policy has a policy of sum assured Rs. 20 Lakh and the company declares a bonus of Rs. 10 per thousand of sum assured, then the bonus works out to be Rs. 20,000. Now since this bonus is not compounding every year, it will remain Rs. 20,000 till it is paid out. Hence, you could see a disadvantage here that you are essentially losing interest on that money. This bonus may accrue to the insurance holder till the maturity or it may be paid out before the maturity as well.
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If premium payments are discontinued at any point of time before maturity, the policy continues with a reduced sum assured proportionate to the premiums paid. One can also surrender the policy at any time and get the surrender value, which is usually calculated as a percentage of the premiums paid excluding the first year's premium and all extra premiums. It is therefore not advisable to surrender the policy, as the amount realized will be much lower than the premiums paid.
Following are the types of endowment plan
In this plan, insurance premium is endowed in several units of a specified unitized insurance fund. Also, the insurance holders can often select the funds where they want to invest their premiums.
This plan is a with-profits endowment in which the basic amount ensured is equivalent to the death benefit from the beginning of the policy. Later, assuming the expansion or growth, the final payout or return would be much higher than the initial sum.
Low cost endowment is a blend of a particular investment where an expected future growth rate will meet up a target amount and a declining life insurance component to make sure that the entire target amount will be paid as a minimum if any accident occurs (any kind of physical illness or death).
These policies are also known as second hand endowment policies. These are traditional with-profits endowments. The Traded Endowment market enables buyers (investors) to buy unwanted endowment policies for more than the surrender value offered by the insurance company. Investors will pay more than the surrender value because the policy has greater value if it is kept in force than if it is terminated early.
Unlike term plans where one does not get any benefit on maturity, the basic attraction of an endowment plan is the maturity benefit. Therefore, the return generated on the premiums is an important factor while choosing a plan. Returns depend on the bonuses that accrue on the policy. Being an endowment assurance policy, this plan is apt for people of all ages and social groups who wish to protect their families from a financial setback that may occur owing to their demise.
In addition to the basic policy, insurers offer different benefits such as double endowment and marriage/ education endowment plans. The cost of such a policy is relatively higher. Other riders that can be attached to the main policy are Critical Illness rider, Term and Major Surgical Assistance rider.
To learn more about the riders that can go with an endowment please give a missed call on 022 6181 6111
The lump sum (Sum Assured+ All Bonuses) that is payable on the maturity date of a policy.
Yes. You can change beneficiary nominated by you at any time until the maturity date. All you need to do is to inform us about the change by completing the ‘Application for Change in Policy Contract’ form.
Subject to certain limits and conditions prescribed by the Income Tax Act, 1961, premiums paid to effect or to keep in force an insurance policy on the life of the assesses or on the life of the wife or husband or any child (whether minor or major) of the assessed irrespective of the status of the child, enjoys tax rebate under section 80C of the Income Tax Act 1961.
The cash value payable by the insurance company on termination of the policy contract at the desire of Policyholder but before the expiry term is known as Surrender Value.
This is a with-profit plan and participates in the profits of the Corporation's life insurance business. It gets a share of the profits in the form of bonuses. Simple Reversionary Bonuses are declared annually at the end of each financial year.
The bonus declared does not compound it, only accumulates
Money back plans are a special type of endowment plan and are also called as anticipated endowment assurance plans. Under money back plans, survival benefits are spread over the term of the policy i.e., certain percentage of sum assured is paid at regular intervals. Apart from the above, death benefit continues like an endowment plan i.e., full sum assured shall be payable on death within the term irrespective of earlier survival benefits.
Riders are additional benefits added to the base plan or policy at an extra premium. Riders/add-ons is the additional benefits, which can be added to the basic policy by paying marginal additional premium. Each company has got their own set of riders and the most common riders offered by insurers are: Term rider, Critical illness rider, Accidental death and dismemberment rider, Waiver of premium rider, Payor benefit rider To ensure you make a wise investment, call us on 080 67974000 to help you make an informed decision!
You must check and see whether or not there is availability of guarantee of return, what the lock in period is, details of premium to be paid, what would be implications of premium default, what the revival conditions are what the policy terms are, what are the charges that would be deducted, would loan be available etc.
The disclosures made in a proposal are the basis for underwriting a policy and therefore any wrong statements or disclosures can lead to denial of a claim.
In case of certain proposals, depending upon the age of entry, age at maturity, sum assured, family history and personal history, special medical reports may be necessary for consideration of a risk. E.g. if the proposer is overweight, special reports like Electro Cardiogram, Glucose Tolerance test etc could be required, while for underweight proposers, X-ray of the chest and lungs with reports could be required.
After premiums are paid for a certain defined period or beyond and if subsequent premiums are not paid, the sum assured is reduced to a proportionate sum, which bears the same ratio to the full sum assured as the number of premiums actually paid bears to the total number originally stipulated in the policy. For example, if sum assured is 1 lakh and the total number of premiums is payable is 20 (20 years policy, mode of premium is assumed yearly) and default occurs after 10 yearly premiums are paid, the policy acquires the paid up value of 50,000/-. Paid up Value = No. of Premiums Paid / No. of Premiums Payable X S.A=10/20 X 100000 = 50000/-. This means that the policy is effective as before except that from the date the 11th premium was due, the sum assured is 50,000/- instead of original 1,00,000/-. To this sum assured the bonus already vested (accrued) before the policy lapsed, is also added. Example if the bonus accrued up to the date of lapse is 35,000/-, the total paid up value is 50000 + 35000 = 85000.
Surrender Value is allowed as a percentage of this paid up value. Surrender value is calculated as per the surrender value factor, which depends on the premiums paid and elapsed duration.
If the policy conditions permit grant of loan, loan is sanctioned as a percentage of the Surrender Value.
Usually the Insurance Company will send intimation attaching the discharge voucher to the policy holder at least 2 to 3 months in advance of the date of maturity of the policy intimating the claim amount payable. The policy bond and the discharge voucher duly signed and witnessed are to be returned to the insurance company immediately so that the insurance company will be able to make payment. If the policy is assigned in favour of any other person the claim amount will be paid only to the assignee who will give the discharge.
Settlement option means the facility made available to the policy holder to receive the maturity proceeds in a defined manner (the terms and conditions are specified in advance at the inception of the contract).
The basic documents that are generally required are death certificate, claim form and policy bond, Other documents such as medical attendant's certificate, hospital certificate, employer's certificate, police inquest report, post mortem report etc could be called for, as applicable. The claim requirements are usually disclosed in the policy bond.