While we place emphasis on getting gains in the short term to take care of immediate financial requirements, we often end up neglecting the advantages of financial planning for the long haul. While both long and short-term objectives are equally vital, discovering the right investment that balances both these aspects is essential. An endowment policy is one such innovative investment choice that will help safeguard your family’s financial future.
Knowing More about Endowment Policies
An endowment policy is a specific life insurance plan that ensures your family’s financial safety while enabling a lump sum benefit in turn. In case of any unfortunate event, there will be a guarantee that the family will get this amount. However, in case you survive the policy duration, there is another advantage, which is an assured amount, known as the sum assured. The dual nature of these plans makes them highly appealing to those who want the security of life coverage with the scope to get savings.
Financial Safety and Guaranteed Returns
One key benefit of endowment policies is that they enable guaranteed returns in the form of the sum assured. These policies have lower risks, enabling your money to witness growth over a period of time. Additionally, the policy may offer bonuses, which are not guaranteed, and depend on the insurer’s performance. The payout, including the sum assured and bonuses, is made at the conclusion of the policy tenure, which may help in meeting long-term objectives as well.
Enables Discipline in Savings
Ensuring regular savings is a difficult task since multiple costs crop up every now and then. Staying on track with long-term savings plans can seem like a continual struggle. Yet, with an endowment policy, you will have to pay premiums regularly. It will encourage more disciplined savings, making sure that you are keeping money aside for your future requirements. Also, unlike regular savings accounts, where you may be tempted to withdraw money for sudden costs, the endowment will lock in the savings, keeping impulsive spending at bay.
Tax Deductions
Another key feature of endowment plans is the tax deductions. The premiums payable for these policies will be eligible for deductions under the Income Tax Act’s Section 80C. The death benefit and maturity amount will also be tax-free as per Section 10 (10D), provided the annual premium does not exceed 10% of the sum assured. If the premium exceeds this limit, the maturity amount will be taxable.
Flexibility for Achieving Long-Term Objectives
Endowment plans have flexible tenure choices, enabling a choice of a policy tenure syncing with your specific financial objectives. Whether you wish to build a corpus for the higher education of your child in 15-20 years or retire comfortably within 25-30 years, you can customise your endowment plan to suit your objectives. You can also obtain loans against the policy if there are any emergencies, thereby enabling an extra layer of financial flexibility. However, taking a loan may reduce the final maturity or death benefits.
Conclusion
An endowment policy enables an extensive financial solution through the provision of life insurance and savings mechanisms, with guaranteed returns promised in the form of the sum assured. This plan should be a good option for obtaining financial security in the future. Every investment that you begin today has the potential to grow into a considerable corpus to ensure security for the future.
