In this post we will be looking at the meaning of education endowment, its features and benefits, who should buy endowment policies and why should endowment plans be bought.
INTRODUCTION.
Securing quality education for children is at the top of every parent list, but tuition can be very expensive, and an untimely death could put a plug on their future. Most parents desire is for their child to succeed and surpass their achievements, so there are variety of Life insurance and savings plans which put the child’s education at the forefront.
Endowment policy is so designed that the benefits can be used for the education of a named child. The policy may be issued on the life of the father or mother. The maturity date must correspond with the date anticipated that the child will enter into a Secondary School, Teachers College or a University. The maturity benefit is paid installmentally. Education endowment helps your family prepare for the unexpected, by ensuring the continued payment of the annual school fees of a child in the event of an untimely death of the insured parent or guardian.
WHAT IS EDUCATION ENDOWMENT?
Education endowment is a plan that provides benefit for the payment of policyholder’s child’s school fees and other incidentals at any chosen level of his/her education – Primary, Secondary or Tertiary level. Through this arrangement; a parent can start to provide for the education of his child immediately, and so dispel all the worries of uncertainty and the strain of not being able to fund his child’s education in future. The policy guarantees the education of your child whether you are alive or otherwise to the tune of your sum assured.
FEATURES AND BENEFITS OF EDUCATION ENDOWMENT POLICY
An endowment policy is essentially a life insurance policy which, apart from covering the life of the insured, helps the policyholder save regularly over a specific period of time so that he/she is able to get a lump sum amount on the policy maturity in case he/she survives the policy term.
Key Features of Endowment Policy
Below are a few key features of an Endowment plan:
- Provides Death Benefit
It also comes with a death benefit. Since it is a combination of an asset and a life insurance policy, this plan provides life to the life assured. If the life assured dies during the policy period, the candidate obtains the entire sum assured amount. Even if you aren’t present, this plan assures that your family has enough money to pay the bills.
- Serves Dual Purpose
Dual Purpose Endowment plans are a type of insurance products plan that offers life assured both life insurance and an investment opportunity. This strategy can provide a financially comfortable future for you and your family members. You can expand your reservoir to guarantee that you have enough money to satisfy your future needs.
- Provides Maturity Benefits
In contrast to life insurance, this strategy contains a maturity benefit. If the life promised survives the entire insurance period, a maturity bonus is guaranteed. With the help of this method, you may invest your money in the long run. This benefit will encourage you to save money in a systematic way.
- Offers Guaranteed Additions
Endowment plans are contributing policies, which implies the insurance provider will announce incentive schemes on the insurance on an annual basis. Endowment plans ensure improvements after the premium payment term finishes. If the life guaranteed dies during the policy term, assured enhancements are made to the death benefit, or to the maturity benefit when the plan matures.
BENEFITS OF EDUCATION ENDOWMENT POLICY
Endowment insurance policies come with a wide range of benefits.
- This plan provides financial assistance in the form of the sum assured and incentives to the policyholder’s family.
- This plan assists policyholders in creating a savings pool for themselves, which they receive at the policy’s maturity and can either reinvest or use to enjoy life or accomplish financial goals.
- An endowment policy gives you a sense of security.
- Endowment plans provide a disciplined route for savings, which could come in handy in case of a financial emergency.
- Educational endowment policy can be used as collateral for loan.
- The future education of the child is secured to the tune of the targeted amount.
- Bonus declaration enhances the benefit of the endowment plan.
- Policy loan facility exists.
WHO SHOULD BUY ENDOWMENT POLICIES?
- An individual who wants to ensure that his/her children’s future education is not disrupted in the event of early death.
- Educational institutions who want to make their schools more attractive to parents/children.
- Financial institutions granting children education loans.
- People with a regular stream of income and need for a lump sum amount after a period of time may consider buying an endowment plan.
- Any individual who wants to save towards his/her future education.
- Salaried people, small businessmen and professionals such as doctors and lawyers should look at this plan to meet their long-term financial security needs.
- people who are risk averse and do not mind settling for lesser return than taking additional risks should go for endowment plans.
- An individual who wants to save for future education of the children.
WHY SHOULD ENDOWMENT PLANS BE BOUGHT?
Endowment plans offer a disciplined way of saving money for future financial needs. An added advantage is the life risk cover which would be of great help to the family if something untoward happens to the main bread winner. The returns may be lower, but they are mostly risk free in case of guaranteed sum assured. Tax benefits, subject to certain conditions, are also available on these returns.
This explains why endowment plans are preferred by risk-averse investors as besides providing cover to an individual’s life in case of an eventuality, they also give the maturity amount to the policyholder if he survives the policy.
WHAT TO CHECK WHEN BUYING AN ENDOWMENT POLICY.
- Choosing a suitable policy will depend on many factors, including your current life stage, individual need, income and risk appetite.
- You also need to check the premium rates of various endowment plans as they are expensive compared to term plans. Therefore, a mistake here will cost you more in the long term.
- After comparing the premium rates, the next important thing to check is the insurance company’s track record with respect to bonus payments. Returns being an important factor for deciding on saving options, customers should know about the bonus rate. Also, try translating it into a simple ROI to know the relative worth of the endowment plans.
- Try to pick an endowment plan which is simple and easy to understand.
- Avoid policies with complex features and benefits, unless you are able to understand them very well, because there could be some catch in the fine print, caution experts.
CONCLUTION.
Education Endowment Policy are the most profitable investment option. Although the policy’s returns may be slightly lower than those offered by many other products, it comes with low risk and great liquidity. When you compare the benefits of an education endowment plan to those of any other product, you’ll see that it’s a good bet. It is a lifesaver in times of financial difficulty, allowing you to overcome any emergency with the help of a loan. Above all, the plan provides you and your family with complete financial stability.