An endowment policy is a combination of insurance and savings, which invests a particular amount in a life insurance cover and the remaining amount, is invested by the provider. In case an endowment policyholder outlives the policy term, the insurance provider offers a maturity benefit to him/her. Furthermore, some endowment policies may offer bonuses on pre-specified periods. If applicable, the bonuses are paid either to the policyholder at the time of policy maturity or to the nominee in case of a death claim.
Endowment policies are also known as traditional life insurance. These plans come with an element of investment. As the risk involved is lower as compared to the risk factor of other investment products, the returns are lower as well.
Benefits of Endowment Plans
Here are the benefits of endowment plans.
Return on Investment- It acts as a long-term financial planning tool that offers returns on investment at the time of maturity.