What is Endowment Life Insurance Policy?

Endowment Insurance Policy

An endowment policy is basically a life insurance policy which, apart from covering the life of the insured, helps the policyholder to save regularly over a certain time, so that he/she gets a lump sum amount on the policy maturity in case he/she lasts the policy term.

A life insurance endowment policy pays the complete sum assured to the beneficiaries if the insured expires during the policy term or to the policyholder on the maturity of the policy if he/she survives the term. Hence, it fulfills the dual necessity for savings and life cover under a common plan.

How does it differ from Whole Life Policy?

The difference is that endowments take a shorter coverage period and mature sooner, usually in 10-20 years, whereas the Whole life policies are meant to last for the insured’s whole life and thus they mature when the policyholder touches the age of 95 or 100. It has a less probability that the whole life policies mature.

And, Endowments characteristically have relatively higher monthly premiums, the shorter the endowment term, the higher the premiums — while whole life policies frequently have relatively lower monthly or annual premiums.


There is a fallacy very prevalent in the market today that a term plan is unusable, because if you live the term, there is no profit by way of a lump sum pay out.
This is the way a term plan is made.

You live – no payout.

You don’t last – your family is protected.

As a reason of the apparent disadvantage of the term plan, that it does not provide anything profitable to the policyholder in case he or she survives the term of the policy, the insurance companies came up with a new form of insurance product known as the Endowment policy.

  1. It all begins when you make monthly or annual payments.
  2. A part of your monthly sum is used to buy life assurance which depends on your age, gender and time of endowment validation.
  3. The remaining of your payment is invested either on a with-profit basis or a unit-linked basis. The magnitude of the lump sum you get at the end of your endowment often depends on the working of these investments.

How your money is invested:

As mentioned above, your money is invested in a with-profit basis. This means your savings are joined with other investors’ money and invested by the insurance company in a range of diverse investments, naturally including shares, fixed-interest investments and property.

This pool is utilized to meet the costs of running the insurer’s business and then the left over (the profits) are shared with you and the other investors by stating bonuses that increase the value of your policy.


  • Reliance Life Insurance super endowment policy
  • Kotak classic endowment policy
  • LIC New endowment policy
  • HDFC Life Endowment assurance policy
  • SBI Life endowment policy


Basically, There are two broad types of endowment policies – with profit and without profit. In these two categories, different dissimilarities are structured to help policyholders meet different financial objectives, such as savings, children’s education/marriage, retirement, pension etc.

The different types of endowment plans are:

  • Unit Linked endowment policy:

These are the life insurance policies where the premium is presented in units of a total insurance fund. Units can be redeemed to cover the cost of the life assurance. The insurance policy holders get to choose the funds where their premiums are to be invested in and in what fraction.

  • Full endowments policy:

This is a very profitable insurance plan where the basic sum guaranteed equal the Death Benefit at the start of the policy and, if the insured selects growth option, the concluding payout would be much higher than the sum assured.

  • Low cost endowment policy:

The main aim of a low cost endowment policy is to pay off. It promises a yearly growth rate, but does not guarantee of paying off your loan (for which you might have taken the policy) in full at maturity.

  • Limited payment endowment policy
  • Double endowment policy
  • Joint life endowment policy
  • Unitized with profit endowment policy
  • Non-profit endowment policy



  • Double benefit
  • Trustworthy
  • Well-organized savings
  • Secure bonus
  • Compounding returns
  • Loan facility
  • Double tax benefits
  • High liquidity
  • Quality flexibility
  • Additional benefits

An Endowment Plan can be your best bet if you want a policy that gives more than just life cover.

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