Individual
Endowment Plan
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Written by
Abhishek Chakravarti
BFSI Writer
Abhishek is a financial writer with over 6 years of experience in the BFSI sector. Prior to his current stint with Axis Max Life Insurance, he has worked with leading fintech startups. He specializes in writing about taxation and various investment products like ULIPs, retirement plans, guaranteed investment plans, mutual funds etc.
Reviewed by
Sahil Rawal
BFSI Expert
Sahil Rawal is a digital & brand management specialist with over 10 years of experience in Financial Services Industry. Life insurance professional with expertise in digital marketing strategy, website content marketing and brand communication designed to increase brand awareness, drive engagement & sales.
What is an Endowment Plan?
An endowment plan is a type of life insurance policy that combines financial protection with disciplined savings. In this plan, beneficiaries get a death benefit in case of the policyholder's demise. However, if the proposer survives the policy tenure, they receive a guaranteed maturity benefit. The life cover payout and applicable bonuses (if any) can be used to fulfil various financial goals like funding a child's education, arranging down-payment for a home, etc. Another perk of this type of policy is that it doubles as a savings instrument. These plans offer moderate returns with low overall risk and allow policyholders to build wealth through regular investments.
Types of Endowment Plans
Now that the endowment meaning is clear, let’s discuss the certain types of endowment plans in India:
1. Unit Linked Endowment Plan
Unit Linked Endowment plan is suitable for individuals who are willing to take more risk by investing in market funds. If market-linked plans and endowment meaning is clear to you, you might have an idea about a unit-linked endowment plan. A unit-linked endowment plan works like a market-linked investment scheme, wherein a part of the premium is used to buy units of investment funds. Consequently, the returns and endowment fund value depend on the NAVs (Net Asset Value) of the endowment fund.
2. Full-Profit Endowment Plan
As endowment meaning is known, this type of full-profit endowment plan mitigates the risk of market returns by providing an assured sum on maturity or on the untimely death of the policyholder. In addition to a sum assured, the policyholder is also entitled to the bonuses that are paid out from time to time and can be redeemed upon maturity or in the event of the untimely death of the policyholder.
As the name suggests, this type of endowment policy doesn’t offer bonuses and profits unlike the previous type of endowment policy. However, it does offer some guaranteed additions to the policyholder that can be redeemed on the maturity or the untimely death of the policyholder.
3. Low-Cost Endowment Plan
As the low-cost endowment meaning suggests, this type of plan is one of the most affordable endowment plans, given that it comes with a low premium. Yearly bonuses are also included in this.
This type of endowment plan also allows withdrawal in emergencies. Furthermore, this can be used to fund loan payments.
Benefits of Investing in an Endowment policy
As the endowment meaning is two-fold, it has many advantages that the policyholder can benefit from. Here are some of the benefits of endowment policy:
1. Financial Security for your Family
2. Helps Build Savings
3. Flexibility to Decide Premium Frequency
4. Loan Option
5. Maturity Benefits
Some types of endowment plans do not only provide sum assured but also offer maturity benefits in form of additional bonuses, and guaranteed additions. These maturity benefits help increase the endowment fund value (endowment fund meaning = returns + accrued bonuses), helping individuals generate more wealth.
6. Tax Benefits
Features of an Endowment Plan
An endowment plan is an insurance plan with multiple features. Here are a few of them:
1. Lump-Sum Payout
Some types of endowment insurance plans offer a lump-sum payout. The lump-sum payout can include the sum assured, and guaranteed additions provided by various types of endowment plans.
2. Option to Buy Riders
With an endowment plan, policyholders can buy additional riders to maximize their benefits. Riders offer various benefits to the policyholder in return for a nominal extra premium. Every insurance company provides different type of riders. However, some of the most commonly found riders include critical illness, waiver of premiums, and accidental death riders.
3. Survival Benefit and Death Benefit
The pivotal characteristic of an endowment plan is that it provides both, survival benefit and death benefit. If the policyholder survives the policy term, they can get the maturity amount, and if they do not, the beneficiary gets the sum assured.
4. Suits Both High and Low-Risk Appetite
Whether you are someone who can afford to take more risks or someone who cannot, there are different types of endowment plans catering to every level of risk appetite, high or low. Unit linked endowment plan, for instance, is most suitable for individuals who have a high-risk appetite, while individuals with low-risk appetite can opt for the kind of endowment plan that mitigates market risks by providing a guaranteed sum.
How Does an Endowment Policy Work?
Like other types of life insurance policies, an endowment policy works through regular or limited premium payment. You can pay premiums regularly; a pre-decided sum assured will be paid to the nominee in the instance of the untimely death of the policyholder or the maturity amount is paid in case the policyholder stays alive. In addition to it, some types of endowment plans offer guaranteed additions and bonuses.
The returns or the sum assured differ from policy to policy. For instance, if you choose a low-risk endowment plan, you get a guaranteed sum that depends on the premium. However, in other types of endowment plans, the policyholder gets additional profits and returns based on market conditions.
Riders for Endowment Plans
Riders are additional covers that can be bought on top of a basic insurance policy. The additional cover provides benefits that can help individuals save more by offering extensive coverage. Generally, these are a few riders that can be bought with an endowment plan.
1. Critical Illness Rider
Illnesses don’t come with a warning, all the reason why getting a critical illness cover can be highly beneficial if God forbid there’s a diagnosis. A critical illness rider provides a lump-sum payout to aid with the heavy medical costs of the treatment.
2. Accidental Death Rider
This type of rider provides an extra payout to the beneficiaries in case the policyholder suffers from a fatal accident – in addition to the death benefit the beneficiaries are already entitled to upon the untimely death of the policyholder
3. Disability Rider
Disability caused due to an illness or accident can cause significant losses, both emotional and financial. A disability rider can mitigate the financial loss by offering an extra payout if such a mishappening occurs.
4. Waiver of Premium
Death or critical illness can disrupt the premium payment following financial struggles caused by them. Waiver of premium rider, as the name suggests, waives off the future premium paying requirement if the policyholder is diagnosed from a critical illness, disability.
5. Waiver of Premium
Hospitalization can cause significant financial stress. A hospital cash benefit provides some relief by offering a daily cash allowance in an event of hospitalization.
Note: Although these are the most common riders available, they still differ from insurer to insurer. In other words, not all insurance provides provide all the types of riders mentioned above.
Who Should Buy Endowment Plans?
Any earning individual who wishes to generate a corpus to support themselves and their family should buy an endowment plan. As the meaning of endowment is clear, an endowment plan is an insurance and savings instrument, the ultimate goal of providing financial protection to your family, be it in your presence or absence.
Additionally, those individuals who are looking to save tax can also buy an endowment plan, as premiums paid on an insurance policy are tax-deductible (up to Rs 1,50,000).[2]
Things to Know Before Buying an Endowment Plan
Now that we have discussed endowment meaning, it has been well established that buying an endowment plan is highly recommended, it needs to be purchased carefully. Here are all the things you must know before you buy an endowment plan.
1. Know Your Risk Appetite
It’s imperative to understand endowment meaning and your risk appetite before you buy an endowment policy, as the type of endowment plan you buy should depend on your risk appetite. If you have a high-risk appetite, then a Unit-Linked Market endowment plan is highly suggested.
2. Decide your Premium Payment Frequency
An endowment plan gives you the liberty to choose your premium payment frequency. This means you can pay premiums annually, monthly, quarterly or semi-annually. This can be decided according to your budget, and convenience.
3. Choose Suitable Riders
Policyholders can yield extra benefits by buying riders on top of their basic insurance policy. Ergo, when you are buying an endowment plan, choose your riders wisely.
For instance, a peek into the family medical history can determine if you should buy a critical illness rider, as critical illnesses can also be genetic. Additionally, an accidental death rider is also recommended if you commute through a vehicle on a regular basis.
4. Know the Claim Settlement Ratio of the Insurer
Choosing a reliable insurance company is the most important element on the checklist. You wouldn’t want to pick an insurer with a poor claim settlement ratio as it puts your investment at risk. A high claim settlement ratio points to the increased probability of your claims getting settled by the insurance company.
Endowment Policy Taxation
By now we know the endowment meaning, the types, its features and benefits. That said, one of the many benefits of an endowment policy is that it is a tax saving instrument.
Under Section 80C, insurance premiums paid against life insurance policies are tax-deductible up to the limit of INR 1,50,000. Additionally, the maturity amount or the sum assured is also free of taxes.
What are the Documents Required?
Here is a list of documents required to buy an endowment policy:
- Photograph
- Address Proof
- Income Proof
- Application form
To Make a Maturity Claim
- Endowment Policy Document
- Discharge voucher
To Make a Death Claim
- Claim Form
- Certificate of death
- Endowment Policy document
- Deeds of assignments/ re-assignments if any
- Form of discharge executed and witnessed
Frequently Asked Questions
When should I buy an endowment plan? Is there a right time?
Is it possible to change the beneficiary of my endowment policy?
Are there some exclusions to endowment plans?
Does an endowment plan offer a lump-sum payout?
Can I discontinue my policy?
What is an endowment fund?
ARN NO: PCP/EP/020823
[1]www.policyholder.gov.in/HowToMakeaClaim_Life.aspx#
[2]www.incometaxindia.gov.in/tutorials/20.%20tax%20benefits%20due%20to%20health%20insurance.pdf
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Why Choose Axis Max Life?
99.65% Death Claim Paid Ratio
(Source : Individual Death Claim Paid Ratio as per Audited Financials for FY 2023-2024)
304 Offices
(Source: As reported to IRDAI, FY 2023-24)
₹1,779,409 Cr. Sum Assured
In force (individual) (Source: Axis Max Life Public Disclosure, FY 2023-24)
₹150,836 Cr. Assets Under Management
(Source: Axis Max Life Public Disclosure, FY 2023-24)
Customer Reviews
Endowment Plan
“My husband had invested in Axis Max Life on the recommendation of his friend. Our family expenses were totally dependent on this insurance fund for several years after his death. I must say that this insurance provided a huge support to my family during the difficult times.”
Mrs. Kapoor, 38 years
Endowment Plan
“I came across Axis Max Life Savings Plan a few years ago when I was researching the market for savings options. I invested in the policy soon after. The plan suits my exact requirements in terms of meeting my savings goals, sufficient life coverage, and maturity benefits.”
Mr. Pal, 35 years
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