Financial needs

Endowment policy will help individuals contribute towards the investment along with insurance.
Endowment policy can meet individuals various financial needs such as funding one's retirement, children's education and/or marriage or buying a house.

Types of Endowment Polices

Endowment polices are of two types- with profit and without profit. The policy holder will be entitled to sum assured along with bonus in case of with profit options. There will be only sum assured towards the maturity or upon death.

Guaranteed returns

Investment in Endowment plans has guaranteed returns which is lump sum amount payable at maturity or to the nominee upon death.

The amount received upon the death of the policy holder during the policy term is called as Guaranteed Death Benefit.

The lump sum amount payable at maturity is called as the Guaranteed Maturity Benefit.

Guaranteed surrender value (GSV)

GSV is the minimum amount that one is eligible to receive when surrendering the policy.
The policyholder will be eligible to receive GSV if the premium is paid for at least three years. Usually, it will be 30 per cent of the basic premiums paid, which excludes the first year premium amount.

Reversionary Bonus or a Terminal Bonus

Usually, under reversionary bonuses are declared per thousand Sum Assured annually at the end of each financial year based on the profit made by the company.

Once declared, they will be part of the guaranteed benefits of the plan.

Terminal Bonus will be a one-time payment, which is payable during the termination of the policy.

Things to check before buying endowment plan

There are different endowment plans available in the market catering different needs. Individuals should check premium rates, bonus declared, claim settlement ratio among others

Conclusion

Endowment plans are expensive when compared to ULIPs, but plans are safer. While, the returns could be lower when compared to other investment plans, but endowment plans are mostly risk-free as there is guaranteed sum assured.

However, many experts suggest avoiding endowment plans as it will not serve to compete for purpose of investment or insurance. Which means returns received from endowment policy is not sufficient in either of cases.