Security vs Savings: What if you didn't have to choose between the two? An endowment plan makes it possible! This type of plan combines life insurance protection with a guaranteed savings component, making it a good choice for people who want both financial safety for their families and a lump sum payout in the future. But how does an endowment plan work, and what makes it different from other life insurance options? Let’s take a look.
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An endowment plan is a life insurance policy that combines insurance coverage with savings. If the policyholder passes away during the policy term, the nominee gets a lump sum death benefit. If the policyholder survives the term, they receive a maturity benefit that includes the sum assured and any applicable bonuses.
The first step is deciding how long you want to be covered and how much financial protection you want. The sum assured is the guaranteed amount your nominee will receive if you pass away during the policy term.
Once the policy starts, you pay premiums regularly, either monthly, quarterly, yearly, or as a one-time payment. These premiums are divided into two parts, where one part goes toward your life insurance cover, and the other goes into the savings component.
Most endowment plans offered by traditional life insurers are participating policies. This means they are eligible to receive bonuses declared by the insurance company based on the company’s profits. These bonuses are usually added to the policy annually and increase the final payout.
If you live through the whole policy term, the insurance company pays you the maturity benefit. This includes the sum assured plus the accumulated bonuses.
If the policyholder dies during the policy term, the nominee receives the death benefit. This is usually the sum assured plus any bonuses accrued till that date.
Neeraj, a 35-year-old father of two, buys an endowment plan with a 20-year term and a sum assured of ₹10 lakhs. He pays an annual premium of ₹40,000. Over the years, the policy has earned bonuses.
If Neeraj passes away during this period, his family will receive the sum assured and the bonuses accrued till that point. But if he survives the full 20 years, he receives the ₹10 lakhs plus all the bonuses as a maturity payout, which he can use for his children’s education or retirement.
Endowment plans are designed to suit a wide range of individuals, whether you're starting your career or planning for retirement.
| Criteria | Requirement |
| Minimum Entry Age | 18 years |
| Maximum Entry Age | 50 to 60 years (varies) |
| Policy Term | 10 to 30 years (some insurers offer up to 35 years or more) |
| Premium Payment Term | Single premium or regular premium payment |
To apply for an endowment policy, you will typically need the following:
Aadhaar Card, PAN Card, Passport, or Voter ID
Birth certificate, PAN Card, Passport, or school leaving certificate
Utility bill, Aadhaar, Passport, or Rental Agreement
Salary slips, ITR, bank statements, or Form 16
Recent passport-size photograph
The official application form that includes personal, financial, and health-related information
If required based on age or sum assured
Here is what makes endowment plans stand out:
Whether it is the death benefit or the maturity benefit, endowment plans ensure that a lump sum amount will be paid out either to your nominee or to you.
Because you need to pay premiums regularly, endowment plans help stay consistent with your savings over time.
If you choose a participating endowment plan, you may receive reversionary bonuses and terminal bonuses, which increase your policy value over time.
Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act. The maturity amount is usually tax-free under Section 10(10D), subject to certain conditions.
Many people confuse endowment plans with ULIPs or term insurance because they all offer life cover. But they all work very differently. Here's a quick comparison to help you understand the differences:
| Endowment Plan | ULIP | Term Insurance |
| Offers life cover with guaranteed savings | Combines life cover with market-linked investments | Pure life cover |
| Offers maturity benefits along with bonuses, if declared by the insurer | Returns depend on market performance, such as equity, debt, etc. | No returns if the policyholder survives the term |
| Low to moderate risk | Moderate to high risk, depending on fund choice | No investment risk involved |
| Fixed premium amount | Flexible premium allocation between life cover and investment | Generally low premiums for high cover |
| Maturity benefits are paid if survives the policy term | Fund value paid at maturity, which may vary | No maturity benefit, only the death benefit applies |
It is important to understand the advantages and disadvantages of an endowment life insurance policy before selecting a plan.
Offers life cover along with savings
Provides a lump sum on maturity
The sum assured is guaranteed
Eligible for tax benefits
Can be used to meet future goals like education or retirement
Premiums are usually higher than term insurance
Returns may be lower than market-linked plans
Less flexible in terms of investment choices
May have lock-in periods and penalties on surrender
Bonuses are variable and not guaranteed
Here’s how to decide if an endowment plan aligns with your long-term financial goals:
An endowment plan is a good option for those who want the combined benefits of life insurance with disciplined savings. This plan allows you to grow your money safely without market risks. It’s especially suited for long-term goals where stability, predictability, and guaranteed returns matter most.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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