When you invest your money in any financial instrument, you invest it with the intention of getting returns. The returns added to your investment will help you have a financially secure future and help you accomplish your goals. There are many options that you can take advantage of for your investment needs. Among them is the option of endowment plan as well.
When it comes to endowment plans, there are different type of plans in it. One of them is a pure endowment plan.
What exactly is pure endowment? Should you invest in it? Read more to find 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 policy. In the investment part, you get to decide in which fund you want to invest your money. Your money will be invested in exchange of a specific number of units. This will increase your investment. On the other hand, the insurance offers your loved ones with a life insurance cover. In the event of the policyholder’s sudden demise, the insurer will pay the beneficiaries a death benefit. This amount can help the beneficiaries manage their expenses and save up for the future. Contrarily, if the policyholder survives the term, maturity benefits along with bonus, if any, is paid.
What is pure endowment?
In the classification of endowment plans comes pure endowment. What exactly is pure endowment though? In this plan, when you invest money, you are required to survive the term of the policy in order to get the maturity benefits. This plan does not offer any maturity benefits or death benefits to your family if you were to pass away during the term of the policy. Further, you are also required to pay the premiums till the required period to get the maturity benefits at the end of the policy term.
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 it. 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 beneficiaries of the insured. 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 form of savings to cover daily expenses.
3. Premium tenure
If you are able to pay the premium required by the plan till the specified term, you become eligible for the maturity benefits. If, in any case you cannot pay the premium, chances of your policy getting lapsed increases. While the insurer might provide you with a grace period, however, 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 plan.
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. The main pre-requisite is that you need to survive the term of the policy. Once you take these factors into consideration and if you feel that this plan can fulfil your needs, you should opt for this plan.
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.