An endowment plan is one of the most popular forms of life insurance. It combines the element of insurance and investment and provides you with a wholesome financial product to explore. There are many advantages of an endowment life insurance policy. There are however a few points to consider before buying an endowment plan. Take a look at this article to know more.
Important factors to consider while buying an endowment plan
Here are the factors to consider when buying an endowment life insurance policy:
- Value of the cover: This is by far the most important factor to consider when buying an endowment plan. You need to assess your insurance requirements and then buy a cover that’s large enough to protect your family members in your absence. To correctly calculate your ideal life insurance cover, you must take your current income into consideration. You should also take your age, the number of dependent family members, the major financial milestones and the combined value of your mortgages into account. A thorough evaluation of these factors will help you understand what the sum assured from the endowment should be. Buy the policy accordingly. A cover that’s too low won’t help your nominees after your demise. Similarly, a cover too large would be redundant and unnecessarily drain your finances.
- Opt for an endowment cover with riders: A lot of insurers offer benefits like marriage endowment policy, education endowment etc. Keeps such additional benefits in minds before you finalize on a particular endowment plan. You may also pay for certain riders such as surgical assistance or critical illnesses and opt for them.
- Duration of the cover: An endowment plan is usually bought keeping a large financial goal in mind. So if you want to cover your child’s education or you want to cover a large home loan, you can buy such a plan. The duration of the plan therefore should be until the goal is realised. So if you have a 10 year old child and want to cover his university education, the term of your plan can be about 15 years. Similarly, if you have a home loan of 20 years, you can buy an endowment plan for 20 years as well.
- Flexibility options: An endowment plan offers various options to select from. For example, it would make sense to opt for a regular pay endowment policy in case you are a salaried person whose income is fixed.
- The type of policy: Did you know that there are different types of endowment plans? You can choose an endowment assurance plan or a double endowment plan. You can buy a unit linked endowment plan or a non-profit endowment plan. There are close to 10 types of endowment insurance plans available. You therefore need to research and find out how each plan works and which plan would provide you with the best results.
- Claim settlement ratio: You have to be careful about choosing the right insurance provider. Always check the claim settlement ratios of the various insurers. It is wise to buy the endowment plan from an insurer who boasts of a healthy claim settlement ratio. If you buy a plan from someone who has a low claim settlement ratio, your nominees may face a claim rejection as well. So choose your insurance provider carefully.
- Investment aspect: Since an endowment plan combines insurance and investment, you have to choose your plan carefully and see what kind of returns it fetches you. The investment aspect is an important factor to consider as it will determine how much your money will grow. If you want to take more risk, go for a ULIP. If you do not want any risk and simply want to build up a corpus, go for a non-participating endowment plan. Everyone’s requirements are different and so you have to choose the correct kind of endowment plan to meet your investment goals.
These are some of the very important factors that you should consider when buying an endowment life insurance plan. The right plan will provide the right kind of financial protection to you as well as your loved ones. But have to assess your own requirements as insurance needs vary from person to person. Do not blindly buy an endowment plan that your friend bought as his life requirements may be very different from yours. So keep the factors mentioned above in mind and buy the most appropriate endowment plan for yourself.