When Should You Go for An Endowment Policy

Do you have financial goals that you wish to fulfil in the future? Having a strong economic base is important to be able to pursue those goals easily. To create that base, you must first choose the right financial products and park your money wisely in them for the long term. One of the most versatile financial products that can help you in this regard is an endowment policy, which is a life insurance offering with a savings element attached to it. Endowment plans are offered by life insurance companies and come with a host of features that can suit your needs and that of your loved ones. 

It is not only necessary to select the appropriate kind of plan for your goals, but also equally pertinent to buy it at the right time. When it comes to financial planning, it is the ‘when’ rather than the ‘how much’ that takes precedence. So, when should you ideally buy an endowment plan? Let’s explore this in detail.

How does an endowment plan work? 

If you have bought a savings plan before, you would have an idea of how such plans work. A certain pre-decided amount is paid by you as the monthly savings. In endowment plans, however, this amount acts as the premium and does two tasks rather than just one. It not only adds to your savings corpus but also creates the life cover. The savings help create a lump-sum amount that you will receive when you outlive the maturity of the policy. 

On the other hand, if an unfortunate event causes your demise, the life cover is provided to your loved ones. Thus, each aspect of the endowment life insurance plan is useful for two different situations that you or your family may face. 

There are other benefits to endowment plans, such as:

• Guaranteed income

If you are the type of person who does not want to bear risks for the sake of heavy returns, then endowment plans are the ideal option for you. The insurer parks the savings portion of your money into different fixed income instruments, such as fixed deposits and sovereign bonds. These are low in risk and remain comparatively unaffected by market volatility. So, when the policy matures, you receive guaranteed income. 

• Loyalty additions 

You can opt for a participating endowment policy which is linked to the profits of the insurance company. When the company gains profits, you receive a bonus which is added to your life cover amount. 

• Various types of premium payment options

You can choose to pay your premiums in monthly, quarterly, and even annual options. Ideally, you should opt for a frequency that allows your present income and lifestyle to thrive while still saving a bit of money for the future. You can use a life insurance calculator to get an estimate of your premium based on different variables. This estimate can help you plan more effectively. 

When to buy an endowment plan?

The sooner, the better

As with most other financial products, the sooner you buy an endowment plan, the better. You must remember that endowment plans are savings plans. And parking your money in a savings plan is a discipline you should form as soon as you start earning. You do not have to invest large amounts. Since you may be at the start of your career, you can keep aside a small portion of your income and deposit it in your savings plan. 

Even though you may not require life insurance coverage at this stage, it may prove to be of help when you start your own family. The premium quoted by the insurer may also be quite low since you are relatively young and exposed to fewer risks, health-wise. 

If you are late in opting for an endowment plan, then read this…

You can still enjoy the benefits of an endowment plan, even if you opt for it at a later stage in life. The only compensation you would have to make is paying a higher premium and at more frequent intervals. The premiums anyway increase as you age. By opting for a higher premium and paying it frequently, you allow your corpus to grow exponentially, even within a short period of time. The life insurance calculator tool can estimate the premium you should ideally pay to achieve a particular amount within a certain duration. 

Nevertheless, the benefits of an endowment plan are maximised when you buy it at the right time. Thus, you must start saving for an endowment life insurance policy as soon as you can.