So, it seems like you have been searching a lot for a suitable life insurance program. Well! A big round of applause to you, as finally, you have been thinking about the future. Of course! No one wants to risk the happiness of their families after they are departed from this world.
So, the best thing you can do is to enroll yourself into an insurance plan. However, there are a plethora of insurance policies in the US, which are enough to confuse a sound mind. Therefore, it is best in your interest to have a term life insurance with endowment.
Term Life Insurance – What is it?
Term life insurance, commonly called the life insurance, is a type of insurance policy in which the family members of the insured person receive payment after his or her death. Like every other policy, there are specific terms and duration for the term life insurance. But it is the best way to have a death benefit.
For example, if person ‘A’ is a policyholder and the total duration of the policy is 20 years. And if ‘A’ dies within the duration, then his or her family would receive the benefits (payment as per agreed terms). But in simple term life insurance, the premium is mostly decided by the insurance company.
The Concept of Endowment
So, if talking about the term life insurance, you will notice that the beneficiaries of the policyholder will receive the amount after the demise of the insured. But, on the contrary, an endowment is something different, and it is much popular than a simple term life insurance.
In fact, most of the insurance companies are now more focused on creating insurance policies, which includes the endowment concept.
So, endowment life insurance is a type of insurance policy that has all the basic terms of term life insurance including some advanced options for the people who are interested in buying insurance.
If you opt for the endowment plan, you are permitted to choose the duration of maturity. Along with the amount you are willing to save each month as a premium.
Keeping your ‘savings per month amount’ in mind, the insurance company guarantees a specific payout. And that payout is known as an endowment, and it is granted when the policy is matured.
A Common Misconception
It is seen that many people are unable to understand the true meaning of endowment term life insurance. And it is because of the marketing fact that has concentrated more on paying college fees of children.
However, the reality is bigger than what people think it is. There are no limited or restricted areas or terms to receive the amount.
For instance, if ‘A’ has a matured endowment life insurance, then he or she can use it for several purposes, such as paying the bills, tuition or college fees, living expenses, or any other required expenses.
And in case ‘A’ dies before the tenure is completed, then his or her child or any mentioned beneficiary will receive the death benefit. And the beneficiary will be allowed to use it for different goals.
Types of Endowment Term Life Insurance
There are different types of endowment term life insurance. Nevertheless, the prominent ones are:
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Non-Profit Endowment Life Insurance
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Traditional Endowment Life Insurance with Profits
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Full-Cost Endowment Life Insurance
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Low-Cost Endowment Life Insurance
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ULIPs
Non-Profit Endowment Life Insurance
Some people are not good at savings. They find it difficult to save every dime they have for a better future. So, this policy type of endowment is for such people. The non-profit or without profit endowment policy is clear as it sounds.
There is no profit, but it is great for savings. It is best for people who think their amount would be wasted instead of being saved for any mishaps or needs.
In this type, there is a proper plan with a fixed premium and payout. Once the duration is matured, the policyholder gets the same amount that he or she wanted to save before buying the policy.
For example, if you want to save $20,000 that will be required by you after 20 years, then you will buy this policy. And once the duration is matured, the same amount of $20,000 will be given to you. In case of death, the lump sum amount will be paid to the beneficiaries.
Traditional Endowment Life Insurance with Profits
In this type of endowment life insurance, the policyholder receives the amount at death or maturity. However, the payout can be increased due to additional bonuses, which are given to the policyholder.
So for example, if you choose a $20,000 plan, then you could enjoy annual bonuses as per plan along with a bonus on the amount of $20,000.
But is important to understand that not all the insurance firms provide bonuses; therefore, make sure you go with the highest bonus provider because it will be helpful to you or your beneficiaries at the end of the day.
Full-Cost Endowment Life Insurance
The full cost or full endowment life insurance provides the highest profits on the amount of death benefit. What happens is that when you take this policy, each of your premiums is invested, and the earned profit is given to you on maturity or, in case of your death, to the beneficiaries. This is why the payout is much higher than expected.
Suppose, your final payout was fixed to $10,000 after 20 years, and on maturity, the profit is 8%. So, you will be receiving an addition of 8% on the final amount. This means that after 20 years, you will get $10,800 instead of $10,000.
Low-Cost Endowment Life Insurance
In this type of endowment life insurance, the premiums are low and so the profits. It is because the premiums are invested to achieve the targeted payout when the duration is matured, or if the policyholder is dead. This is why it is best for repaying any mortgage loans.
For example, you wish to have $10,000 at the end of 20 years. So, the insurance company will charge you with the lowest premiums to meet the required amount. Therefore, you will only get $10,000, and any other profits on your paid premiums will not be your property.
ULIP
Unit-linked insurance policy (ULIP) is also a type of endowment term life insurance, where people can select organizations (also called ‘units’) for their premiums to be invested. These units help in covering the final amount that is to be given at the end of maturity or death.
So, if ‘A’ wants to have $10,000 after 20 years of maturity, then he or she will pick a unit for investing the premiums to get at least $10,000 at the end of the day. However, if the units have given higher profits, then there is a possibility that ‘A’ can have more than the expected amount.
Benefits of Endowment Term Life Insurance
Endowment term life insurance comes with several benefits, such as:
No-Risk on Investment
Did you notice that in all the types of endowments, there are no risks of losing the amount? This is the best thing about endowment term life insurance, as you don’t have to worry about the percentages because there is a surety of getting the required amount.
Suitable for All Age Groups
Ever thought why endowment term life insurance has always been marketed to you as a relief for paying college or tuition fees? Of course! Most of the college students are young, and sometimes they are unable to meet the fee structure.
So, this policy is of great support for such students. Nevertheless, even the baby-boomers can enjoy perks of endowment term life insurance.
No Need to Prove Financial Stability
When talking about normal insurance policies, most of the people are disapproved by the insurance companies due to their financial conditions. So, not everyone can relish the advantages of having an insurance policy. But when the endowment is added, then such restrictions are found to be minimized.
So, even if you are a student or you are about to retire, you can surely enjoy all the benefits without being financially judged.
Zero Requirement for Medical Examination
Going for medical examination to get an ordinary life insurance policy surely gives chills down the spine. And if the report is not up to the mark of the insurance company, then there are chances of rejection.
But when you go for the endowment term life insurance, then there is no need to go through the entire medical examination procedure.
However, some insurance firms do have medical checkups for the people above 50 years of age, but such cases appear to be rear.
Nevertheless, regardless of age, it is always important to take good care of your health.
Serves Multiple Objectives
As discussed above, the endowment term life insurance is not only for paying college fees to get a degree. You can use the amount to buy a house, pay the mortgage or any due rent, or to buy or pay for any other important thing.
Insurance is essential, especially when there is so much going on with life. However, everyone can’t buy life insurance due to inflexible terms by the insurance companies. But getting an endowment term life insurance policy is an inexpensive way to get insured for a secure tomorrow.
Any adult can have this insurance regardless of financial eligibility. And the best thing about an endowment is that it can help you in saving, as well as, gaining higher profits.
