ULIPs and mutual funds are two popular yet distinct investment avenues, each coming with its unique set of benefits and drawbacks. Know which one is better for your individual needs and preferences.
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Endowment life insurance is a combination of life insurance and a savings program that offers maturity benefits along with the usual death benefits. With the help of an endowment plan in the UAE, the policyholder can save regularly to get a lumpsum amount as maturity benefits provided they survive the policy tenure. The policyholder receives their sum assured on the pre-determined date in the future as per the policy’s terms and conditions.
If the policyholder passes away during the policy tenure, a sum assured (death benefit), along with a bonus (if any), will be given to the nominee. These, and several more features make endowment life insurance an appropriate option to secure family post-retirement or to financially meet sudden unfortunate circumstances.
Here are the types of endowment plans in the UAE –
This type of endowment insurance plan is for individuals who have a high-risk appetite, as the premium is used for investment in different market assets. Here, the market performance determines the return on investment the policyholder will receive once the policy matures. The included life insurance cover financially secures the policyholder’s family in case of the former's unexpected demise during the policy tenure, where the nominee receives death benefits in such situations.
Also known as with-profit endowment plans, the full-endowment plans provide the policyholder a sum assured once the policy matures. However, if the policyholder unexpectedly passes away during this time, the sum assured will be paid to the nominee. If the policyholder survives the policy tenure, the insurance company offers additional benefits in the form of maturity benefits.
These endowment investment plans combine the features of ULIP’s earning potential with assured returns to shield your investment against the volatility of the market. This is a relatively risk-free investment option that offers maturity benefits to eliminate market volatility. The rest is the same, as the beneficiary receives the amount in the form of a death benefit If the policyholder passes away.
With low-cost endowment plans, the policyholder has to pay a comparatively less amount as a premium for comprehensive coverage. This enables individuals to save more for emergencies.
In case the policyholder passes away during this time, the nominee will receive an assured sum as a death benefit. If the policyholder survives the term, they receive the accrued annual bonuses. This type of endowment insurance policy is suitable for repaying fund loans or achieving specific financial objectives.
This endowment insurance policy offers optimum financial security to the policyholder’s family in case of unfortunate events. The insurance provider pays a lumpsum amount to the policyholder upon the policy’s maturity or to the nominee if the insured passes away unexpectedly. However, as there are no bonuses with these plans, the payout amount is fixed.
Discussed below are the key features of endowment insurance plans –
If the insured individual passes away, the beneficiary will receive the sum assured as death benefits with applicable bonuses. However, if the policyholder outlives the endowment insurance policy, they will receive maturity benefits.
An endowment insurance plan helps the policyholder create a corpus for the future that will provide financial security to their family. The payout of this plan in terms of maturity and death benefits is higher than that of a pure life insurance plan.
Unlike mutual funds and ULIPs, conventional endowment insurance plans are safer as the premium is not directly invested into equity funds or the stock market.
The insured can pay a premium based on the policy chosen. Thus, depending on their convenience and budget, the policyholder can make the payments on a monthly, half-yearly, quarterly, or yearly basis.
Most endowment insurance policy plans come with an option to include riders like total permanent disability, critical illness, and accidental death with the original insurance plan. Some endowment insurance plans also offer the option to seek a waiver on premium payment in case of total permanent disability or critical illness.
Given below is the list of benefits of the endowment plan -
An endowment plan offers basic life insurance coverage during the policy tenure. Thus, if the policyholder passes away during this time, their nominee can continue their lifestyle without worrying about the expenses by receiving death benefits.
An endowment life insurance plan serves a dual purpose – it not only functions as a conventional life insurance policy but also as a long-term investment plan
Endowment life insurance is significantly safer compared to most investment plans and market securities
Under an endowment insurance plan, the insurance company can also declare bonuses. The bonus here refers to the additional money added to the proceeds which are paid out to the policyholder as a survival benefit.
Under an endowment policy, the insurance company offers a lumpsum payout when the policy matures.
Endowment insurance policy helps the policyholder create a corpus in the long run, as the policy term can range from 10 to 40 years.
At nominal additional prices, the policyholder can enhance the coverage of their endowment insurance plan by including riders like waiver of premium, family income benefit, total permanent disability, critical illness, and more
Endowment insurance policies function the same way as other life insurance policies. They are primarily designed to offer financial stability to the policyholder and their family by integrating the best elements of a life insurance plan and an investment plan. With the premium amount being invested in a variety of market securities like stocks, debts, bonds, and other instruments, the investment of the policyholder can record considerable growth over time.
The investment aspect provides a steady growth of profit on the funds, providing financial security to the insured in the long run. As a life insurance policy, it financially secures the policyholder’s family if the former dies before the end of the tenure of the plan.
term insurance and endowment assurance are two different types of life insurance plans available in the UAE. The table below discusses their key points of difference in detail –
Protection-oriented policy that usually offers only death benefits
Savings and protection-oriented policy that covers both premature deaths and survival till the end of the term
Only death benefit is paid – no maturity benefit in most plans
Both death and maturity benefits are paid, although one may receive only one
No bonus offered
Bonus available under many plans
No cash value or loan facility
Both cash value and loan facility are available
While endowment assurance plans can certainly make for a useful addition to an individual’s financial portfolio, here are a few things that must be considered before selecting endowment plans in UAE –
The applicant must assess their investment horizon and select a policy term that aligns with their financial goals. This can help them plan their investments over time as per their current and long-term financial goals.
An optimal sum assured must be chosen so that a suitable corpus is created for the fulfilment of financial goals. For this, one can always use an endowment plan calculator and find the right sum assured for their policy.
A suitable premium paying tenure and frequency must be chosen so that the premium is easily paid without having any significant effect on the budget.
Though endowment plans allow a cash value if the policy is surrendered before the chosen term, the option of surrendering is usually not recommended as the cash value is lower than the premium paid.
Listed below following are the riders that a policyholder can opt for to enhance their endowment insurance plan –
This rider offers financial cover for treatment (usually in a lump sum) if the policyholder gets diagnosed with a critical illness like kidney failure, paralysis, cancer, or heart ailments
With this rider, the insured individual is not liable to pay premiums of the endowment insurance policy if they suffer from a critical illness or permanent disability
The hospital cash benefit rider provides the insured individual with a daily cash allowance along with post-hospitalisation benefits, given that they were hospitalised for medical treatment
Under this rider, if the insured passes away in an accident, the insurance company pays an accidental death benefit besides the death benefit to the nominee
Before securing an endowment insurance plan, an applicant should take the following things into account –
It is advised to plan their investments wisely and early as this helps in growing the investment over a long horizon. The policyholder can easily build a corpus and also develop financial discipline.
The applicant should verify whether the plan offers the flexibility to pay the premium based on the nature of their job. If the policyholder is a salaried person, for instance, they can opt for regular premium payment. However, those having irregular income can go for a single payment option or a limited premium payment option.
Several insurance providers offer numerous benefits on top of the basic endowment insurance policy such as critical illness, disability, waiver of premium, and more.
It is important to look for plans that offer bonuses depending on how the insurance company has performed. Here, if the insurance provider makes some profits from the investments, they would distribute it to the policyholders towards the end of the financial year as a bonus.
Endowment insurance plans are considered good investment options as they offer a sum assured to the policyholder (along with a bonus, if applicable) at the maturity of the policy. At the same time, they ensure that the policyholder’s beneficiaries receive the death benefits along with the bonus if the policyholder passes away during the policy tenure. Several investors consider this a more reliable investment option as the premium is not directly invested into equity or other financial instruments.
If you plan to secure an endowment insurance plan in the UAE, you can purchase it from Policybazaar Insurance. As a third-party aggregator, we offer a plethora of term life plans and investment plans. To know about the most relevant options for yourself, fill in the lead form on our site to be directed to the endowment life insurance quotes page. On this portal, you would be able to check a wide range of plans from the leading insurance and investment plan providers in the UAE.
Have a look at the following FAQ section to know more about endowment insurance plans in the UAE –
You should purchase an endowment policy as early as possible after you start earning. The sooner you start investing, the longer the horizon of returns will be.
Yes, you can change the beneficiary of your endowment policy by informing the insurance provider about the changes that you want.
Term insurance plans provide a sum assured when the policyholder passes away unexpectedly during the policy tenure. There is no payout if they survive the policy. An endowment insurance policy, on the other hand, provides the benefits of both a term insurance plan and an investment plan.
In a lump sum endowment policy, you are paid the maturity benefits as a lump sum amount rather than as a regular or monthly amount.