When you invest money in any financial instrument, you support it to get returns. The returns added to your investment will help you have a financially secure future and help you accomplish your goals. You can take advantage of many options for your investment needs. Among them is the option of an endowment plan as well.
When it comes to endowment plans, there are different types of projects in it. One of them is a pure endowment plan.
What exactly is a pure endowment? Should you invest in it? Read more to find out about it.
What is an endowment plan?
It is a type of life insurance policy. In this policy, you get the dual benefits of investment and insurance under the same procedure. You can decide which fund you want to invest your money in in the investment part. Your money will be invested in exchange for a specific number of units. This will increase your investment.
On the other hand, the insurance offers your loved one life insurance coverage. The insurer will pay the beneficiaries a death benefit if the policyholder dies. This amount can help the beneficiaries manage their expenses and save for the future. Contrarily, if the policyholder survives the term, maturity benefits and a bonus, if any, are paid.
What is a pure endowment?
In the classification of endowment plans comes pure endowment. What exactly is a pure endowment, though? In this plan, when you invest money, you are required to survive the term of the policy to get the maturity benefits. Further, you must pay the premiums until the required period to get the maturity benefits at the end of the policy term. This plan does not offer your family any maturity or death benefits if you were to pass away during the policy.
When should you opt for this plan?
Here are the things to consider before buying an endowment plan such as pure endowment:
As pure endowment requires the policyholder to survive the term, it benefits those who have a life goal to accomplish. This could be saving for your child’s education or wanting to send them abroad for higher studies. It could also be saving enough for their marriage. If you have any pending loans or debts and wish to clear them with the help of the returns from a pure endowment plan, you should consider investing in them. The purpose should be considered before you select this plan.
2. Death benefit
As mentioned earlier, the plan does not offer any death benefit to the insured’s beneficiaries. If case of an unfortunate demise during the policy term, the insurer will not pay any compensation to your family. This means they will have to rely on other savings to cover daily expenses.
3. Premium tenure
If you can pay the premium the plan requires until the specified term, you become eligible for the maturity benefits. If, in any case, you cannot pay the premium, the chances of your policy getting lapsed increase. While the insurer might provide you with a grace period, your survivability is also vital. If you stop paying the premium abruptly, you end up losing a lot of money invested in the plan. Keep in mind the required tenure of the project.
Should you go for this plan?
Based on the points given above, there are different factors you need to consider —-the purpose, your lifestyle, and lack of death benefit. Once you think about these factors and feel that this plan can fulfill your needs, you should opt for this plan. The main pre-requisite is that you must survive the term of the policy.
This is one type of endowment plan that you can invest in. There are different types of endowment plans that you can know about by contacting your insurance advisor.