Pros and Cons of Endowment Life Insurance Policies

An endowment life insurance policy is an insurance policy with two components: term life insurance and saving component. This policy has several pros and cons which we believe you should consider before buying it

Pros of endowment life insurance policy

Guarantee returns: You are 100% guaranteed that you or your beneficiary will get the face value of your money after the maturity date or when you die.

Low risk: There are minimal chances that you will lose your money. This is because your premium is invested in a saving account.

Bonuses: Your insurer will add bonus to your account based on the performance of your policy

Cashback: You can receive your cash back even before the maturity date.

Cons of endowment life insurance policy

Low –interest rate: This policy comes with low-interest rate and your money may become undervalued due to inflation after the maturity period.

Not tax-free: In a word, your premium will be taxed

Long maturity period: Most endowment life insurance policies have a maturity period of at least 10 years. So, if you are not financially disciplined, you may become frustrated.

High surrender charges: Even though endowment life insurance policies allow you to receive your cash back before the maturity period, it comes with high surrender charges of at least 10%.

Bottom Line

As you can see, buying an endowment life insurance policy can be a very tricky decision. So, we advise you to contact us or your insurance agent for more financial advice.