Is endowment plan a good choice? For whom and why?

suitability of endowment plans

Life insurance plans are offered in many variants to satisfy the needs of different individuals. While term plans are pure protection plans, there are endowment plans as well which offer a saving element and help create a corpus.


However, many of your clients are unaware of endowment plans as a result of which they don’t opt for such plans. Do you know what endowment plans are?


Endowment assurance plans

Endowment plans are life insurance plans which promise to pay either a death benefit or a maturity benefit.


If the insured dies during the term of the plan, the death benefit is paid. If, however, the insured survives till the end of the policy term, maturity benefit is paid. Endowment plans are traditional insurance plans which provide guaranteed returns.


Features of an endowment plan


  • These plans come with a long-term horizon where the plan tenure goes as high 30 years


  • Endowment plans might be offered as participating plans. In such plans, a bonus is added to the sum assured and paid on death or maturity.


  • There is no investment risk as the sum assured is promised on maturity or death. The policyholder has the choice of the sum assured based on which the premium is calculated.


Who should buy an endowment plan?


Endowment plans are suitable for the following types of individuals–


  • Who are risk averse


The benefits under endowment plans are guaranteed. As such, the plan has no market-related risks. It is, therefore, apt for individuals who are risk averse and want to invest in guaranteed instruments.


  • Who has a long-term investment horizon


Individuals willing to invest over a long tenure are also ideal customers of endowment plans since the plans allow long-term tenures. Individuals can save regularly under the plan and build a corpus over a long duration.


Moreover, if the bonus is declared, the corpus would grow substantially over a long-term horizon and would help in fulfilling financial goals.


  • Who want tax benefits


Endowment plans, like other life insurance plans, offer tax benefits too. Premiums paid for the plan are allowed as a tax-free investment under Section 80C and the plan benefits also do not attract any form of tax.


How can you position endowment plans to your customers?


To position endowment plans you must first find out the risk appetite and the investment requirement of your clients. If your client is not interested in investing in the capital market for fear of negative returns, you can pitch in endowment plans.


Participating endowment plans would be a good fit for such clients as such plans would give the added benefit of bonus additions and promise attractive returns. Look for plans which promise guaranteed additions or other types of additions to the sum assured besides the bonus. Such plans would help in providing the maximum returns for your customers. However, make sure to match the investment horizon of your clients to the term offered by the plan.


Moreover, if your client is looking for tax-saving fixed income benefits, you can pitch in endowment plans. The investments, returns and the benefit received under the plan would all be tax-free for your clients and the returns would also be free from market volatility.


So, understand the concept of endowment insurance plans and sell these plans to clients who fit the product profile. Pitch endowment plans to your risk-averse, tax-saving clients and you can increase your sales.

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