Sunday, August 7, 2011

Life Insurance: Endowment Policy

An endowment policy covers risk for a specified period. At the end of this policy 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 endowment policy is more of an investment than a whole life insurance 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 insurance 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 today. It not only provides financial risk cover in case the insurer's premature death but the insurance amount is also repaid once this risk is over.

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