Endowment Policy combines the risk cover with financial savings; endowment policies are the most popular policies in the world of life insurance.
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. 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.
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.
The two different types of endowment insurance policies are as follows :
In this type of insurance policy the insurer prefers a combination of options to invest his/her premiums. Some of them will be invested in financial instruments like shares, debentures and fixed deposits schemes of commercial banks while the others would be invested in purchasing an asset and the like. The premium amount of endowment insurance policies are at par with life insurance price.
One can claim a particular amount from the policy if they have met the minimum premium conditions. In case the policy holder’s premiums perform well in the market (in the form of investment) the surplus amount will be accumulated to his/her policy and thereby increases its face value. This amount cannot be misrepresented after it is declared to add them. These additions can come in handy to save or at least cut the policy holder’s loss in the event of created due to fluctuations in the stock market provided the money is invested in the stock market.
This policy is losing its attractiveness due to the facilities given by the next category namely unit linked. This policy provides better return that with profit policy. Under this policy the policy amount is to be employed after the death of the insured. As per this policy the profits that come by way of the insured's investment is transformed into units of the investments. The number of additional units and the extent to which they increase the profits are also brought to the customer’s knowledge.
If the insured succeeds in paying all the premiums without any fail the company also credits the insured’s account with additional benefits. These benefits can at times be very high depending on the customer’s policy duration. In case of policies that have a long duration the additional amount is substantial and equals a big portion of the policy amount itself.
This type of policy includes the characteristics of a life insurance policy and an endowment savings plan. As the name mentions the objective of this policy is to repay the debts incurred due to a mortgage. The idea is to ensure that sufficient amount is available to repay the whole amount of debt incurred in a mortgage after a specific period of time. It is also to be understood that the customer should continue to pay the interest of the mortgage simultaneously while paying the insurance premiums. They will also be able to claim income tax exemption if they have excess cash even after repaying the mortgage. The policy holder has to arrange for funds to pay the mortgage if the money recouped is not sufficient to cover the same.
The insurance company will not accept any responsibility to pay any amount above the policy value whether or not you repay the mortgage. This factor and the steep decline in interest rates are considered to be serious drawbacks for this policy. By and large the policy has already lost its charm for these reasons. However many insurance companies have started of a practice requesting employees to pay an increased premium if the market rate predicts that the current premium will not be sufficient to repay the mortgage. Since life insurance price have come down drastically consumers have started to dislike this when compared with affordable life insurances.
Customers have an opportunity to make more money while surrendering their insurance policy if their policy has been in existence for a couple of years. There are lots of dealers in the secondary market who will help the customers to get a decent price. However for practical reasons like probability of getting a lower return it is advised not to surrender the policy unless they are inevitable.
The need of an endowment insurance policies or a life insurance policy depends on the financial needs of the customer and the risks involved. One can seek the advice of chartered accountant or a tax practitioner to know more details. Most of the insurance companies offer affordable life insurance plans. An insurance agent will also able to suggest a suitable endowment policy.
"nice one"
- sagar, 7th January 2009, Wednesday" excellent, it is very simple and easy to understand, thanks for giving the readers the valuable information... looking forward for much more articles related to taxation"
- shikha, 8th January 2009, Thursday"Hi Sudheer, Thanks heaps for this useful article. In your examples above, you have considered Annual Income as 8,12 Lacs etc. Please confirm if this the CTC or the total Taxable Income after all exemptions and deductions ?"
- Joseph Francis, 8th January 2009, Thursday"Hi Sudheer, Thanks heaps for this useful article. In your examples above, you have considered Annual Income as 8,12 Lacs etc. Please confirm if this the CTC or the total Taxable Income after all exemptions and deductions ?"
- Joseph Francis, 8th January 2009, Thursday"Pls tell me my income tax for 2008-2009 fanancial year My anuual income is 4lacs"
- rukmangadhan.k, 8th January 2009, Thursday"Pls tell me my income tax for 2008-2009 fanancial year My anuual income is 4lacs"
- rukmangadhan.k, 8th January 2009, Thursday"Please send me the tax calculator sheet in excel."
- Manjunatha Swamy.C, 8th January 2009, Thursday"This article is very good and simple to understand the calculation of income tax, at the same time if can brief us about the exemptions under the sec 80C, 80D etc it will be very useful in calculatin the tax liability. "
- Leela, 8th January 2009, Thursday"please comment if payment towards interest on housing loan & deposit under 80 C must be deducted from gross salary before all these calculations of incom tax is made. my gross salary is 12 lakh & i have paid 1.4 lakh towards interest on housing loan & 1 lakh under 80 C.Do I have to pay surcharge."
- bibekananda mishra, 8th January 2009, Thursday"pls, send to mail for income tax, professional tax, VAT, ESI, P.F. advance tax, tds, etc. pls give feed back to me"
- n k krishna, 8th January 2009, Thursday"Hi"
- G.Koteeswaran, 8th January 2009, Thursday"The Income you are talking about in the above tables refers to the Net Taxable Income and NOT the total income. Is that correct?"
- Saurabh, 9th January 2009, Friday"nice one"
- RK, 9th January 2009, Friday"You did not mentioned excemption amount. Is it there in this year also?"
- george, 9th January 2009, Friday"Hi The person whose income is above is 5 lacs he has to pay 30% income tax as per the rule, but here you are counting all numbers of 10% , 20% and 30% taxable numbers in net tax payable. Why do we should count all this."
- Suresh Pasupulati, 9th January 2009, Friday"Thanks for given this articles, it is very useful and easily understandable one "
- Gunasekaran, 9th January 2009, Friday"Thanks a lot for this useful article. I want to know one more thing yhat if I donate some amount to any charetery ,then under what section i will get relief."
- satya narayan gupta, 9th January 2009, Friday"plz forward tds rates calculation & pf"
- pramod, 9th January 2009, Friday"Please let me know, Whether Home Loan Principal and Interest comes under same same heading? Under which heading children School fees come? Where to calculate Previous year NSCs? If I am not getting Medicla Allowance with my salary, where to show mediacal expenses of self and dependents? Which all Post office and Bank deposit schemes are accounted for tax savings? If monthly Pension is taxable, where and how it is calculated? Is it mandetory to declare Pension while tax filing? "
- Raghuveera Nellithaya, 9th January 2009, Friday"Please send me the tax calculator in excel sheet"
- Shrinivasa.U, 9th January 2009, Friday"What are the permissable deductions like Childrens tuition fees, Housinfg loans etc? Could you please clarify these isues. Thanks"
- Mathew Muricken, 9th January 2009, Friday"Sir, Your information was very useful,iam eager to learn how it is practically applicable in corporate sectors Thanking you Sankaranachiar "
- sankaranachiar, 9th January 2009, Friday"Good Morning sir, and copies thanks for the needy information at the moment. Conveying my best complements and expecting good luch your future endeavours. thanks and regards Brm "
- b rama mohan, 9th January 2009, Friday"Easy & Good way to calculate Tax liability. Simply the best..."
- Jasmeet Kaur Gulati, 9th January 2009, Friday"Simple & beautifully explained. Thanks"
- R K Nagpal, 9th January 2009, Friday"Please tell me how much rebate we will be getting by investing in any scheme. please post the tax calculator in Excel shee"
- prashant Saini, 9th January 2009, Friday"I am earning Rs.500000 annually. What will be my tax liability and how much tax rebate I can get."
- Arindam Kumar Baidya, 9th January 2009, Friday"excellent, nice one it is very simple and easily understand, thanks for giving us the valuable information... looking forward for much more articles related to financial market & taxation MANOJ TRIPATHI"
- MANOJ TRIPATHI, 9th January 2009, Friday"Very Useful :)"
- Vinod Murthy, 9th January 2009, Friday"Very Nice way to calculate the tax. It may help all the general people like us."
- Manimay Ray Chaudhuri, 9th January 2009, Friday"Thanx! it is very simple and easy to understand. It is very useful to calculate income tax due to practical examples."
- P. D. Joshi, 9th January 2009, Friday"thanks"
- what are the appplicable deductions from the income tax, 9th January 2009, Friday"good. pl also tell abt the posssible deductions"
- , 9th January 2009, Friday"In the year 2007 my salary is Rs.8,000/- p.m. By that time I sold a plot and I get some amount from the owner as commission. By the time of (Cheque)they have deducted Rs.4,960/ as TDS and given the Form to me. I have not submitted any tax returns for 2007. Now I like to submit the returns for 2007-08. Is it possible to me to submit now."
- B Ravi Sankar, 9th January 2009, Friday"Pls tell me my income tax for 2008-2009 fanancial year My anuual income is 4lacs"
- Mukesh Juyal, 9th January 2009, Friday"it is really helpful for me because just now a have started my tax consultant forum"
- v s nambirajan, 9th January 2009, Friday"Thanks a lot. Self explanatory and real help for the layman. Can you confirm that loan taken for improvement of existing house will provide tax relief or not. If yes, under what sec and how? Thanks."
- Lt Col TVS Raghava, 9th January 2009, Friday"The tax calculation is not as simple as above example. There are deductions under various sections which needs to be deducted before arriving at the taxable income (also it depends on the metro non-metro). The best way is to develop an excel sheet for calculating the tax. "
- Anand, 9th January 2009, Friday"hi thanks for this information.please tell me my taxable amount.my total earnings is 4 lack 8o thousand.i have a reliance bond of rs10000."
- champa pal, 9th January 2009, Friday"hi thanks for this information.please tell me my taxable amount.my total earnings is 4 lack 8o thousand.i have a reliance bond of rs10000."
- champa pal, 9th January 2009, Friday
