Endowment Policy, India

An endowment policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy. An endowment life insurance policy is designed primarily to provide a living benefit and only secondarily to provide life insurance protection. Therefore, it is more of an investment than a whole life policy.

Endowment life insurance pays the face value of the policy either at the insured's death or at a certain age or after a number of years of premium payment. Endowment policy is an instrument of accumulating capital for a specific purpose and protecting this savings program against the saver's premature death.

Premium on endowment policies is payable for the full term of the endowment policy unless, the insurer dies earlier. When compared to whole life policies, the premium rates for endowment policies are higher and the bonus rates lower. But one of the major attractions of endowment policies is that they provide a return on premium payments, when the policy comes to an end. The endowment received at the maturity of the policy can be used for buying an annuity policy to generate a monthly pension for the whole life.

Endowment policies are one of the most popular insurance plans. Apart from providing financial risk cover in case the insurer's-who is usually a family's breadwinner-premature death, the insurance amount is also repaid once this risk is over. The endowment amount paid at the maturity of the policy can be used for meeting major expenditures such as children's education and marriage, etc.