3. Endowment Policy

An endowment plan is a plan which provides the sum assured with an added bonus or guaranteed additions that may accrue during the policy term. As it provides higher returns, it also charges heavy premiums. Basically there are two types of endowment policies, without profit endowment plans and with profit endowment plans.

In case of without profit endowment plans, profits which your insurance company earns each year are not shared with these plans. Apart from the sum assured, you would probably receive a loyalty bonus, which is paid once for in appreciation of your decision to hold the policy for several years.

Where as with profit endowment plans participate in the profits made by your insurance company each year. This policy offers higher returns than without-profit endowment plans. As it provides extra payback than the without-profit endowment plans, it also demands higher premiums.

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