With a changing world come new problems, at the forefront of which is financial instability. Rising prices of necessities and our growing aspirations somehow make it difficult to realize our dreams. In such a scenario, savings are practically non-existent. This is where endowment plans are a godsend.
Endowment plans serve the dual purpose of insurance and investment: they provide life insurance and also help the policyholder to save money over a period of time so that you receive a lump sum amount on maturation and a life cover to secure your family’s future in the event of a tragedy.
The premium paid is split into three parts: a part of it is allocated for the life insurance cover, a part of it is invested (this accumulates interest over time), and a part of it goes towards the administration expenses of the insurance company. In case the policyholder doesn’t survive the policy term, the beneficiary will receive the life insurance cover along with the amount which has accumulated till the time the policyholder was alive. If the policyholder survives till maturity of the policy, you will receive the life insurance cover along with the lump sum amount.
It can be argued that equity investments are also an alternative for generating wealth. But buying and holding of shares of a stock on the stock market and the income received from the dividends and capital gains is not guaranteed. Stock markets are highly volatile and equity investment is relatively unpredictable.
Endowment funds as discussed earlier; are predictable and your returns are guaranteed. They not only protect your family financially in your absence but they also help you save money which can go towards your retirement, pay your debt, or for your child’s education. After all, who doesn’t like a plan where their money is safe and returns are guaranteed?
Moreover, investment in insurance is tax deductible and so are the earnings on maturity. You can receive tax benefits up to Rs. 1.5 lakhs. On the other hand, equity profits are taxed under capital gains and no tax benefits available on investments.
As such, it is advisable to invest money in an endowment plan. You shall sleep more peacefully when you have the assurance that your money is growing safely. Take steps towards achieving financial stability and look into buying an endowment plan.