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.