Popularly called a savings plan but with some insurance protection, an endowment policy is normally for a specific purpose. But care must be taken that there is adequate protection cover first…

As the word “endow” implies, this is an insurance which is basically savings in nature. It is usually for a selected period to yield a certain maturity sum for a purpose, e.g. children’s university education, retirement, gift, etc.

The endowment policy provides a lower protection than whole life, but a bigger savings element, and the yield or rate of return is higher.

The policy pays the sum insured and any bonuses built up at the end of the period (called maturity benefit), or at death, or total and permanent disability within the period or term purchased.

From the financial planning viewpoint, endowment is a useful product for savings for retirement or children’s education, which can be compared favourably with fixed deposits.

Clients with higher risk appetite may go for Regular Savings Plan (RSP) invested with unit trust. Endowment gives low insurance protection and clients should ensure that they are adequately insured before committing to an endowment plan.

Read more : Demystifying Life Insurance

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