Endowment Plan

An endowment policy is a life insurance product that offers the dual benefits of insurance coverage and savings. It's designed to help you save regularly over a specific period, so you receive a lump sum amount at the policy's maturity if you are alive. This payout can be a great way to meet various financial goals like funding your child’s education, buying a house, or planning for retirement.

How Do Endowment Plans Work?

Endowment plans are quite straightforward. When you buy an endowment policy, you agree to pay a regular premium for a fixed term. This premium partly contributes to life cover, ensuring financial protection for your family, and partly accumulates as savings. Over the years, this savings component grows, sometimes with added bonuses, depending on the policy's performance.

At the end of the policy term, you receive a maturity benefit. This amount includes the sum assured along with any bonuses or additional benefits as specified in the policy. In case of your demise during the term, the beneficiary receives the death benefit, which is usually the sum assured plus any accrued bonuses, ensuring your family’s financial needs are taken care of.

Types of Endowment Life Insurance Plans

Endowment life insurance plans come in various types to cater to different financial needs and preferences. Here's a brief overview

These are the simplest form, offering a guaranteed# sum assured plus potential bonuses. They are low-risk and provide stable returns, making them suitable for conservative investors.

These plans combine life insurance with investment in equity and debt funds. The returns depend on market performance, making them ideal for those who are willing to take on more risk for potentially higher returns.

'With-profit' plans offer bonuses based on the insurer's performance, while 'without-profit' plans do not. The choice depends on whether you want potential additional returns or prefer a straightforward sum assured.

Full endowment plans aim to provide a sum assured that's equal to or greater than the death benefit at maturity, while low-cost endowments are typically used for mortgage repayment and offer lower premiums.

Benefits of an Endowment Policy

They provide life cover and act as a savings instrument. This dual benefit means financial protection for your family and a lump sum payout at maturity for your financial goals.

Regular premium payments encourage disciplined saving habits, essential for long-term financial planning.

In the event of the policyholder's untimely demise, the family receives financial support, ensuring their lifestyle is not disrupted.

The sum assured plus any bonuses on maturity can fund major life goals like education, a home, or retirement.

Premiums paid and benefits received are usually eligible for tax benefits* under prevailing tax laws, adding to their attractiveness as a financial tool.

Many plans offer add-ons or riders for additional protection like critical illness cover, accident cover, etc., making them customizable to individual needs.

Salient Features of an Endowment Policy

One of the hallmark features is the maturity benefit, a lump sum payment received at the end of the policy term, provided the policyholder survives the term.

In case of the policyholder's demise during the term, the nominee receives a death benefit, ensuring financial support for the family.

The duration of these policies is flexible, typically ranging from 10 to 30 years, allowing policyholders to align the term with their long-term financial goals.

Endowment plans offer various premium payment options, including regular pay, single pay, or limited pay, catering to different financial situations.

Participating endowment policies may earn bonuses based on the insurer's performance, adding to the policy's value.

Many endowment policies allow you to borrow against the policy, providing financial flexibility in times of need.

Additional coverage options like critical illness riders, accidental death benefits, etc., can be added for more comprehensive protection.

Why Should You Buy an Endowment Policy?

It ensures that your family's financial needs are taken care of in your absence, providing peace of mind.

The lump sum received at maturity can be aligned with specific financial goals like funding education, buying property, or securing a comfortable retirement.

Regular premium payments instil a habit of disciplined saving, which is crucial for long-term wealth accumulation.

Endowment policies are ideal for those who prefer a stable and relatively low-risk savings instrument compared to direct market-linked investments.

The premiums paid and the benefits received (both death and maturity) usually offer tax benefits** under prevailing tax laws.

The variety of plans available and the option to add riders mean you can tailor the policy to your specific needs and life circumstances.

Who Should Buy an Endowment Policy?

Things to Consider Before Buying an Endowment Policy

Understand your long-term financial objectives. Endowment policies are best suited for goals that are 10 or more years away.

Assess your risk tolerance. Endowment policies are generally low-risk, but if you're looking for higher returns, you might want to consider other options.

Read the fine print. Understand the terms regarding the maturity benefit, death benefit, surrender value, and policy loans.

Ensure that the premium fits comfortably within your budget. Remember, defaulting on premiums can lead to a policy lapse.

Consider the impact of inflation on your future financial needs. Ensure that the sum assured is adequate to meet your future goals.

Explore additional coverage options to enhance your policy. Riders with critical illness or disability can offer added protection.

What are the Limitations of Endowment Life Insurance Plans in India?

The returns on endowment plans are generally lower than those you could potentially achieve with direct equity or other market-linked investments.

These plans require a long-term financial commitment, which may not be suitable for those seeking short-term investment options.

Endowment plans are not highly liquid. Early withdrawal or surrender of the policy can result in significant penalties and a lower surrender value.

The sum assured may not keep pace with inflation, potentially reducing the purchasing power of the maturity amount.

Some endowment policies come with complex features and clauses, which may be difficult for the average person to understand fully.

The cost of endowment plans, considering the premiums and policy charges, can be higher compared to term insurance plans.

What are the Eligibility Criteria for Buying an Endowment Plan?

Most endowment plans have a minimum entry age, often around 18 years, and a maximum entry age, which can vary but is typically around 60 years.

While specific income criteria may vary, insurers generally require proof of a stable income to ensure the policyholder can afford the premium payments.

Endowment plans are suitable for individuals with long-term financial goals, such as retirement planning, children's education, or accumulating wealth.

These plans are best suited for individuals with a low to moderate risk appetite, as they offer guaranteed# returns but with lower potential returns compared to high-risk investments.

Applicants may need to undergo a medical examination, and their current health condition can affect eligibility and premium rates.

Applicants should have a clear idea of the policy term they are comfortable with, as endowment plans usually require a long-term commitment.

Prospective policyholders should have the financial capability to pay premiums regularly over the policy term without financial strain.

Individuals should also consider their tax status, as endowment plans offer tax benefits* which can be an important eligibility consideration for many.

What are the Documents Required for Buying an Endowment Plan?

When applying for an endowment plan, you'll need to provide certain documents for identity verification, financial assessment, and underwriting purposes. Commonly required documents include:

Recent utility bills, Passport, Aadhar Card, or any other government-issued document that verifies your address.

Recent salary slips, Income Tax Returns, or Form 16, to verify your financial capacity to pay the premiums.

Any other documents as specified by the insurance provider, which could include bank statements, employment details, etc.

What is the Complete Endowment Plan Claim Process?

The claim process for an endowment plan typically involves the following steps

Notify us about the claim immediately after the occurrence of the event (death of the policyholder or policy maturity).

Submit all required documents, including the claim form, policy document, death certificate (in case of death), identity proof of the beneficiary, and any other documents requested by the ABSLI.

We will assess the claim, which may involve verification of documents and, in the case of death claims, possibly an investigation if the policy is relatively new.

We will disburse the claim amount either as a lump sum or as per the payout method chosen at the inception of the policy.

In case of any disputes or if the claim is rejected, the nominee has the right to appeal or approach a grievance redressal cell.

What Happens When an Endowment Policy Matures?

When an endowment policy reaches its maturity date, several things happen

You may need to submit certain documents, such as the original policy document, identity proof, and a maturity claim form. We may also require a bank mandate form for direct transfer of the maturity amount.

Once all necessary formalities are completed and documents verified, we will pay out the maturity benefit. This amount typically includes the sum assured along with any accumulated bonuses or profits, as specified in the policy terms.

After the maturity amount is paid, the policy is closed. There will be no further benefits payable under the policy, and it ceases to provide coverage.

Some policies may offer options to reinvest the maturity amount into another policy or convert it into an annuity for regular income. This is optional and depends on your financial goals.

Are Endowment Plans Tax-Free?

The tax treatment of endowment plans in India is subject to the prevailing tax laws, which can change over time. As of the latest information available

Premiums paid towards an endowment policy are generally eligible for tax deduction under Section 80C of the Income Tax Act, subject to certain conditions.

The maturity proceeds from an endowment policy are tax-free under Section 10(10D)** of the Income Tax Act, provided the premium paid does not exceed 10% of the sum assured for policies issued after April 1, 2012. For policies issued prior to this date, the premium must not exceed 20% of the sum assured.

There are certain exceptions to these rules, such as policies for persons with disabilities or specified diseases where the premium threshold is different.

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* Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details
**Sec 10(10D) benefit is available subject to fulfilment of conditions specified therein
# Guaranteed all due premiums are paid.
For further details regarding the above-mentioned rider, please refer to the respective rider brochure(s) available on our website.
¹ Scenario: ABSLI Akshaya Plan, Age 35, Healthy Male, Premium Payment Term: 6 years, Policy Term: 25 years, Benefit Option: Long Term Income, Premium Rs.1lakh p.a. (Rs.100,000X6), Cash Bonus Payout Frequency: Annual, Sum Assured: Rs 710,000. Assumed @8% p.a., Cash Bonus (if declared) p.a. = Rs 23,004, Total Cash Bonus (if declared) (A)= Rs 5,75,100, Terminal Bonus (If declared) + Sum Assured (B) = Rs 8,73,300, Total Benefit (A+B) = Rs 14,48,400. Assumed @4% p.a., Cash Bonus (if declared) p.a. = Rs 8,520, Total Cash Bonus (if declared) (A)= Rs 2,13,000, Terminal Bonus (If declared) + Sum Assured (B) = Rs 7,95,200, Total Benefit (A+B) = Rs 10,08,200.
² ABSLI Vision Life Income Plan, healthy male, age 21, Sum Assured Rs.10 lakhs. Annualised Premium of Rs.1.62 lakhs approx for premium payment term: 8 years, policy term: 79 years, lump sum benefit of Rs.12000 @4% or Rs.3.44 lakhs @8% in 8th policy year, guaranteed regular income of Rs.50,000 plus bonus for life from 9th year.
³ ABSLI Income Assured Plan, age 21, healthy male, policy term 15 years, premium payment term 5 years, sum assured Rs.5 lakhs, Premium payable every year Rs.1,49,604/-, Income benefit Rs.40,000/- maturity Benefit Rs.8,50,000/- and Death benefit Rs.1,825,900/-.
⁴ ABSLI Vision Endowment Plus Plan, age 21 years, sum assured Rs.200000, premium paying term 7 years- annual, policy terms 10 years, Death benefit option:Option A, annual premium Rs.31,502/- for 7 years, Total total maturity benefit including terminal bonus, if any of Rs.2,39,514/- @4% and Rs. 3,07,514 @8% after 10 years for long term financial needs.
⁵ ABSLI Jeevan Bachat Plan, age 20 years, premium payment term 1 year, policy term 10 years, sum assured Rs.2 lakhs, premium payable Rs.20,900/-, maturity benefit Rs.26,120/-, death benefit Rs.2,06,120/-.
ABSLI Akshaya plan is a non-linked participating individual savings life insurance plan (UIN: 109N136V02)
ABSLI Vision MoneyBack Plus Plan s a traditional participating life insurance plan (UIN: 109N093V04).
ABSLI Vision LifeIncome Plan is a traditional participating endowment plan (UIN: 109N079V06).
ABSLI Vision LifeSecure Plan is a traditional participating whole life insurance plan (UIN: 109N087V04).
ABSLI Income Assured Plan is a traditional non-participating savings plan (UIN: 109N089V06).
ABSLI Vision Endowment Plus Plan is a traditional participating endowment plan (UIN: 109N092V05).
ABSLI Jeevan Bachat Plan is a non-linked non-participating life insurance plan (UIN: 109N107V03).
ABSLI Monthly Income Plan is a participating non-linked life insurance plan (UIN: 109N122V02).
ABSLI Vision Lifeincome Plus Plan is a non-link participating individual life insurance savings plan(UIN:109N131V01)
All terms & conditions are guaranteed throughout the policy term, except for the bonuses which would be declared at the end of each financial year. GST and any other applicable taxes will be added (extra) to your premium and levied as per extant tax laws. An extra premium may be charged as per our then existing underwriting guidelines for substandard lives, smokers or people having hazardous occupations etc.
ADV/4/24-25/144

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^ Scenario: Rs. 5,00,000 Single Premium (exclusive of GST), Male, Age 35, Plan Option A, Policy Term : 5 years UIN: 109N135V02
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