Endowment Plans

Contracts that combine life cover with a guaranteed benefit payable at maturity.

An endowment policy pays a sum assured on death during the term, and a maturity benefit if the life assured survives the term. Part of the premium funds the cover and the rest is accumulated by the insurer, with the guaranteed portion stated in the policy document and any bonus declared at the insurer's discretion.

The cover per rupee of premium is much lower than term insurance, and the accumulation is conservative by design. These contracts suit a household that wants a contractual, low-volatility outcome on a fixed date and is willing to pay for that certainty. We place the policy, explain what is guaranteed and what is not, and service it through to maturity or claim.

Key features

• Death benefit during the term and a maturity benefit at the end of it
• Guaranteed additions or reversionary bonus depending on the product structure
• Long commitment — surrendering in the early years usually returns far less than paid in
• Premium payment terms shorter than the policy term available with most insurers
• Loan against policy available after the policy acquires surrender value
• Premium and maturity treatment under the Income Tax Act as applicable at the time