ENDOWMENT PLANS

Life Insurance products uptake seems to be on the rise and lately, people have been particularly keen on investing in products that will not only provide coverage but also help them grow their money.

One such product is an Endowment plan.

Below we look deeper into what it is, how it works, and the type of goals it can help you tackle.

WHAT IS AN ENDOWMENT PLAN?

An endowment plan is a temporary life insurance plan that combines the elements of savings and protection. It provides a life cover as it helps you grow your money and pays out specific maturity benefits at the end of the premium paying term. The life cover in endowment plans provides coverage in the event of the insured’s death.

Most endowment plans provide returns that are fixed at the time of the purchase of the policy and pay out a lump sum amount at maturity. However, some endowment plans help you accumulate your funds slowly and payout partial benefits during the policy’s term.

HOW DO ENDOWMENT PLANS WORK?

Endowment plans allow policyholders to pay regular premiums over a predetermined period (the policy term). The premiums are then divided into two parts: one portion is used to provide life coverage and the other is invested by the insurance company. The amount invested will then be paid out as a lump sum amount at maturity together with any bonuses accrued.

The life cover ensures your loved ones are provided for in the event of unfortunate death while the cash benefits or partial payouts ensure you can still achieve your financial goals and sort out your financial needs during the policy term.

They provide you with a fixed return, the maturity benefit amount, at the end of the tenure of the plan. The maturity amount is always fixed at the point of purchase and is free from any market fluctuations.

In the event of the insured’s death, the beneficiaries will receive the life cover amount and all the benefits payable as specified in your plan.

FEATURES AND BENEFITS OF ENDOWMENT PLANS

• Life Cover– Guaranteed lump sum payout to your beneficiaries in the event of incapacitation, critical illness or death.
• Additional Rider options– Most endowment policies have optional additional benefits such as accidental and disability riders, and waiver of premium at a minimal fee.
• Partial maturity payouts– Some insurance companies offer Anticipated endowment plans that guarantee cash payouts during the policy’s tenure.
• Maturity benefit– Guaranteed lump sum payout (the sum assured) plus any accrued bonuses or benefits if the policy remains active until the end of the premium paying term.
• Flexibility– Premiums can be paid monthly, quarterly, semiannually, or annually, as per your convenience.
• Tax benefit– Tax relief of 15% of the premiums paid, up to a maximum of Ksh.60,000 annually.
• Investment growth– A portion of your premium is invested by the insurance company to help grow your savings.
• Policy loans– Some insurance companies offer policy loans against the paid premiums from the third year.
• Attractive annual bonuses– Other insurance companies offer annual bonuses during the policy’s lifetime in addition to the maturity benefits.
• Low risk– Safer compared to other investment plans. Barely affected by market fluctuations since the returns are fixed at the point of purchase.

USES OF ENDOWMENT PLANS

Endowment plans are generally suitable for long-term financial goals including:

• Education Planning
• Family land purchase
• Mortgage Payment
• Dowry payments and many more

CONCLUSION

An endowment plan is a worthy investment for people who want to stay covered while saving for other financial goals. It helps create a risk-free savings corpus and provides financial support for your loved ones in case of unforeseen events.