Insurance plans are a must have in today’s times. Hence, it becomes crucial to make a well-informed decision when it comes to choosing the right plan. With financial products like Endowments plan and ULIPs made available, it becomes increasingly important to accurately distinguish and be well aware of the associated risks and benefits.

Although it cannot be emphasized enough how important life insurances tend to be to provide a safety net, as a part of this article, we have attempted to inform readers about the choice of going for an Endowment plan or a ULIP.

First Off, What is a ULIP Scheme?

ULIP or Unit Linked Insurance Plan provide their policyholders with a dual advantage. They provide the security of life insurance along with saving through investment aspect. Additionally, investors get the flexibility of choosing between the type of investing to go for. It could be equity, debt or an investment with a mix of both. Key benefits of choosing a ULIP include the following-

1. Life cover in case of death is provided. That is, a sum assured is paid to the beneficiaries. In case the policyholder lives on till the maturity of the policy, the sum assured is paid out to the policyholder itself.

2. Choosing your investment. Since the premium amount is split between the life cover aspect as well as the investment aspect, investors get the freedom of choosing the type of investment they would like to opt for. Investors may opt for a choice that best meets their needs based on the requirement of funds and ability to take on risk.

3. Tax saving benefits may be leveraged by policyholders at the time of premium payment. Additionally, the amount one receives on maturity is tax-exempt.

 Okay, But What is an Endowment Scheme?

Similar to ULIPs, Endowment plans have insurance as well as a savings aspect. However, policyholders do not have a say in terms of the investments done by the providers of this plan. That said, policyholders may expect a life cover, wherein the benefits of the same may be reaped by the policyholders or its beneficiaries in the event of the death of the policyholder. The sum assured provided is usually provided with a bonus amount. Key benefits of an endowment plan include-

• Financial stability during uncertain times through life cover.
• Possibility of rider benefits to cover specific events such as permanent disability and illnesses
• Tax savings
  A loan may be provided against the policy in case of financial need.

Take Away

When it comes to choosing an investment plan, investors are recommended to perform some form of research on the products, associated risks, rewards and premiums. Given financial products demand investors to have a long-term investment horizon, It would be best to learn about products before looking to invest into them.

Also read: In ULIPs, How Is The Premium Used?

Is It A Good Idea To Start A Stable Fund With ULIPs?