Over the period of time, more exposure is given to savings and investments along with the fundamental purpose of life insurance, i.e. the life cover, simultaneously. Investing the money in any fixed deposit results in the lower returns and the stock-market investments are not risk-free when taken at own. Here, traditional investment life insurance comes into the picture, viz. Endowment Plan. It not only allows you to save your money but also results in the sizeable corpus and offers life coverage to the insured person taking care of his family’s future financially. Here are a few reasons why endowment plan is apt for you if you are a moderate risk taker.
Fundamentally, endowment plan is the type of life insurance policy which offers a particular sum assured as death benefit on the unfortunate demise of the life insured; or provides the same sum assured as the guaranteed maturity benefit to the policyholder at the end of the policy tenure. The investment made through the plan is an add-on and the corpus accrued through investments is paid along with the death/maturity benefits. It has to be considered that the return on investment is not guaranteed in any case.
Endowment plans fulfil both the needs of insurance and investments under a single policy. Basically, there are two different types of endowment plans such as plans with profit and plans without profit. Now the question arises why it is beneficial for moderate risk takers? The answer is as follows-
Today, the investment plans such as ULIPs have more demand. But it is always important to understand the consider a few points before going for ULIP. These are aggressive investment plans in which the policyholder is provided with the choice of selecting suitable funds. If the policyholder doesn’t have a sound knowledge of market-linked investments, the investment may lead to loss of money. In the traditional type, i.e. endowment plans, the policyholder doesn’t have any provision of choosing the funds, but it is quite advantageous. The insurance company allocates a part of premiums towards equities and rest towards debts after keeping some amount aside for insurance purpose. The insurers have their experts with the help of whom the company makes the right decision. Since you don’t have to deal with the risk factor, the returns offered on your investments are lower than that of ULIP.
Nevertheless, the corpus accrued over the years is also useful for fulfilling the needs and achieve the desired financial goal such as children’s education or marriage, or for retirement purpose. Like other life insurance policies, the endowment plan also offers tax benefits under Section 80C and Section 10(10D) of the Income Tax Act. Thus, it can be concluded that if you are a moderate risk taker, an endowment plan is apt for you, anytime!