Types of Endowment Life Insurance Policy

There are various plans that provide the policyholder with the opportunity to invest in the capital market. Hence, in these types of funds, the returns are uncertain and depend on the choice of schemes an investor selects. However, in an endowment plan, the policyholder gets the guarantee of returns on the investment made by him. 

Here is the list of endowment insurance examples in order to better comprehend the plan.

1. Education of Child

   As stated earlier, the endowment plan is meant to meet the specific financial goal. Therefore, a policyholder may utilize the plan to complete a child's education. Nowadays, parents tend to send their children to foreign states to provide them with better education compared to the regional states. So, the policyholder may invest the funds to accumulate guaranteed returns to pay the education fee.

2. Marriage

   The parents may start saving early to accumulate significant wealth for the marriage of their daughter. Therefore, it is advisable for parents to begin prematurely to preserve considerable wealth.

3. Financial security

   Financial security could be a perfect epitome or endowment insurance example to understand the concept. It is vital to secure the financial security of the family member or relatives in the absence of the policyholder. Hence, an investment in an endowment plan must be initiated to meet the financial requirement of family members.

4. Wealth Creation

   Wealth creation is another endowment insurance example that can be accomplished by allocating funds in an endowment plan. Upon achieving other financial goals, a policyholder must stick to the creation of wealth to beat inflation. Wealth creation is probably the only means to fight inflation. In addition, wealth creation is also essential to provide a promising future to the next generation. Therefore, the parents must contemplate the legacy and future of the upcoming generation. Hence, it is fruitful to purchase an endowment plan for the policyholder. 

Types of Endowment Life Insurance Policy

An endowment plan is one of the best financial tools to beat inflation and provide financial security to the dependent members of the family. Hence, an individual must understand the types of endowment life insurance policies before buying. 

Listed below are five different types of endowment plan life insurance policies that individuals may consider purchasing to meet their financial circumstances.

1. Unit Linked Endowment Plan

   Under this type of endowment life insurance policy, the premium a policyholder pays is divided into two parts. The first part is utilized to purchase units in an investment fund. The unit could be equity, debt, or hybrid fund. This type of endowment life insurance policy allows investors to invest in a capital market to earn significant wealth in long-term financial planning. The other part of the premium covers the life insurance of an individual. In addition, this type of endowment life insurance policy is also comprehended as ULIP (Unit Linked Insurance Plan). The policyholder may find various tools to calculate the overall returns he may generate from unit linked endowment plan. 

   Additionally, it is at the discretion of the policyholder to choose the fund type in order to invest the premium amount. For example, if the policyholder has a high-risk appetite, he may invest in equity which offers moderate to high risk and a significant rate of returns. At the same time, the policyholder may invest in a debt fund in order to reduce the risk and earn a reasonable return. Further, the investor may also choose the hybrid form of fund in this type of endowment life insurance policy in order to balance the risk and returns. 

   However, it is essential to note that the ULIP comes with five years lock-in period. It means the policyholder is not entitled to withdraw any amount before five years. Nevertheless, he may make a partial withdrawal after the lock-in period. Therefore, the policyholder must invest in this type of endowment life insurance policy to ensure dual benefits.

2. Guaranteed Endowment Plan

   In this type of endowment life insurance policy, the policyholder is entitled to receive a guaranteed or assured return. At the expiry or maturity of this type of endowment life insurance policy, the policyholder receives the lump sum guaranteed returns along with the loyalty funds. Apart from guaranteed returns, a policyholder may also receive the yearly addition funds if he survives the term of the policy. 

3. Full/With Profit Endowment Plan

   In this type of endowment life insurance policy, the policyholder gets a guaranteed sum assured when purchasing the policy. However, the amount can be higher if the company declares a bonus on the final payout. In this type of endowment life insurance policy, the policyholder may also get a surplus amount on his demise. The nominee will be entitled to get the sum assured.

4. Low-cost Endowment Plan

   Under this type of endowment life insurance policy, the policyholder may accumulate the funds entitled to be paid on the predefined period. As a result, the policyholder may build a vast corpus that can be utilized to pay off the loan or write off the mortgages. In addition, if the policyholder passes away, all the benefits will serve the nominee. 

5. Non-profit Endowment Plan

   Under this type of endowment life insurance policy, the policyholder gets a guaranteed addition apart from the assured returns.

Conclusion

An endowment plan is a life insurance policy that offers a lump sum amount to the policyholder on the plan's maturity. In addition, if the policyholder passes away, the nominee will be entitled to utilize the benefits of the endowment plan. As a result, the policyholder may build a risk-free corpus and ensure the financial security of the family members. There are various types of endowment life insurance policy that offers different kinds of benefits to the policyholder. He may choose one and utilize the benefits by paying the premium.

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