What Is Endowment Life Insurance

Endowment Life Insurance

    Life insurance protection and savings – these are the benefits provided by an endowment life insurance policy. Basically, an endowment life insurance policy is an insurance product that lasts for a specified number of years and then when these years have passed the policy is considered matured, the insured receives a lump sum. If the insured dies within the policy coverage period, the beneficiaries will receive the guaranteed minimum benefit plus any dividends or cash value accumulations.

Possible Uses of an Endowment Life Insurance Policy

    An endowment can serve as a sort of a savings fund with life insurance protection. An endowment product can be used for a variety of purposes:

• Retirement
• A child’s college education fund
• Travel
• Any big-ticket expense

    This is the reason why endowment policies have high premiums. It has shorter payment periods than whole life policy and is also expected to provide a substantial amount upon its maturity. The advantage of an endowment vs. a straight savings account is that there may be tax benefits in having a life insurance policy. The cash accumulation/dividends are usually allowed to grow without taxes as long as they stay within the policy.

Kinds of Endowment Policies

    There are different kinds of endowment policies.

• Low cost endowment.
  This is primarily for mortgage payments.

• Unit-linked endowment.
  This is product where a portion of the premiums are invested as units. If you want to surrender the policy, it will also depend on how much the units are priced.

• With profit endowment.
  This is a traditional product where there is a guaranteed sum assured and bonuses or dividends paid out annually. When the insured dies within the policy coverage period, the beneficiaries receive the minimum death benefit plus any cash values/accumulated dividends. There may also be terminal bonuses.

    It is advisable to ask the help of your life insurance agent so that you can decide on the right endowment policy for you.

Surrender of an Endowment Policy

    Before the policy’s maturity date, if worse comes to worst and you can’t pay for the premiums anymore, you can surrender the policy. This means cancelling the policy and receiving the accumulated cash values at the time of the surrender.


Anand Khemka
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