Who Needs an Endowment Plan?

Who Needs an Endowment Plan?

Plan for your family's future with guaranteed returns and life cover through endowment plans by Canara HSBC Life Insurance.

Written by : Knowledge Centre Team

Last published : 2026-01-09

7 minutes read

The endowment policy is a type of life insurance policy. Other than providing you with life coverage, it also allows you to save money regularly. The money that you save is provided to you in a lump sum when the policy matures.

An endowment plan offers little to no risk. Safety of returns is the USP of endowment policies. Since the returns are assured, you can plan and look to achieve important long-term goals with them. It also makes you a disciplined saver and investor.

Investing in an endowment policy also entitles you to receive tax benefits. Under Section 80C of the Income Tax Act, 1961, you can claim deductions of up to ₹1.5 lakh per financial year on the premiums paid towards the policy, subject to overall limits. Additionally, the maturity benefit received from the policy can be tax-free under Section 10(10D), provided certain conditions are met. For policies issued after April 1, 2012, the annual premium should not exceed 10% of the sum assured to qualify for tax-free maturity proceeds.

Furthermore, as per the Finance Act 2023, if the aggregate premium for non-ULIP traditional life insurance policies issued on or after April 1, 2023, exceeds ₹5 lakh in any financial year, the maturity proceeds may become taxable. However, death benefits remain tax-free. It is advisable to consult your tax advisor to understand the specific implications based on your policy and premium amount.

Key Takeaways
 

  • Endowment policies provide both life cover and guaranteed returns.
  • It is ideal for conservative investors seeking safety with assured growth.
  • Endowment plans are suitable for retirement planning, child’s education, and legacy goals.
  • These plans offer tax benefits under Section 80C and Section 10(10D)

Eligibility Conditions of Endowment Plan

The eligibility conditions for purchasing an endowment plan generally include:

  • Minimum and Maximum Entry Age: Typically, the minimum entry age is 18 years, and the maximum entry age ranges from 50 to 60 years, depending on the insurer.

  • Maturity Age: The maximum maturity age is usually between 65 to 75 years.

  • Policy Term: The policy term can vary from 10 to 30 years, based on the plan chosen.

  • Sum Assured: Insurers specify a minimum and maximum sum assured, which can range from ₹50,000 to several lakhs or crores, depending on underwriting.

  • Premium Payment: The policyholder must pay premiums regularly (yearly, half-yearly, quarterly, or monthly) as per the chosen mode and plan conditions.

  • Medical Tests: Some plans may require medical underwriting based on age, health status, and the sum assured opted for.

These eligibility conditions may vary between insurers and specific endowment products, so it is advisable to check the policy brochure carefully before purchase.

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Who Needs an Endowment Plan?

A good endowment plan is ideal for individuals who seek both life insurance coverage and a disciplined way to save for future goals. So, if you're planning for your child’s education or marriage, your own retirement, or simply want to ensure your family is financially protected in case of an untimely death, an endowment plan can help. These plans are especially suited for those with a low risk appetite, as they offer guaranteed returns along with life cover. Unlike market-linked products that come with uncertainty, endowment plans provide a safer, more predictable approach. They also encourage regular savings and combine the dual benefits of wealth accumulation and insurance protection in a single plan.

When is an Endowment Plan the Best Solution?

There are some scenarios under which an endowment plan can offer you the best solution. Here are the scenarios:

  • Fills the Gap in your Retirement Corpus: An endowment policy can prove to be a great addition to your existing retirement corpus. Suppose you have estimated a sum that you think would make up a good corpus post-retirement. But as you do work, you realise that you are well short of the target you set. To fill this gap, an endowment plan comes into play.

    Endowment plans offer you a lump sum amount on maturity. This amount is guaranteed to you provided you pay your premiums regularly. You don’t have to worry about returns as your investment remains safe in the endowment plan.

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Do you know

Did You Know?

According to the guidelines of IRDAI, policies like term insurance and unit-linked plans are ineligible for loans. 

 

Source: The Hindu

 

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  • Protecting Your Child’s Higher Education Goal: Taking care of your child’s education is one of the biggest goals to achieve. You would not want to leave anything to chance when it comes to your child. With the help of an endowment plan, you can ensure that your child completes their higher education even if you are not there for them.

    If while buying the policy, you choose the premium protection option, the following will happen after your death within the course of the plan:
    • The sum assured is provided to the family immediately after the death
    • The life insurer will pay the remaining premiums, and your family will get the maturity benefit as per the normal maturity
  • Safeguard Your Dependent’s Future: An endowment plan builds up your habit of saving. You keep saving an amount for some time. This amount can be used to meet the future needs of your dependents.

    For example
    , you have to secure funds for your daughter’s marriage. You set up an endowment plan and invest in it for a period, say 10 years. When the policy matures, you will get the guaranteed maturity benefit that too with additional bonuses applicable as per the terms of your policy.

    An endowment plan can also help in the achievement of other major goals of yours, as well as others dependent on you. Let’s take a scenario. You are now married and have children, the next goal you want to achieve is to buy a house 15-20 years from now to enjoy your retirement. With an endowment policy, you can invest small amounts, which will give you a large corpus after 20 years. Use this amount to buy a house without putting much pressure on your finances.

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  • Leave a Legacy for Grandchildren: You not only want to help your children achieve their goals, but also your grandchildren. There goes a saying that grandchildren are the greatest blessing you will ever get. Surely you would love to leave a legacy behind for them.

    An endowment plan lets you do that. By taking this policy, you ensure a good future for the next generation. Endowment plans help you grow wealth over time, which becomes handy for the future.
  • Preserve Your Hard-Earned Wealth: What if you have taken a huge risk in an investment and it, fortunately, paid off? Now you have a corpus at your disposal, and you don’t want to take any risk and preserve the wealth that you have created. The endowment policy is the safest instrument you could use at this time.

    The wealth that is accumulated in an endowment plan is not affected by the market. It is generally free from market volatility.

    Thus, your wealth is created, and the principal does not deplete. You will get the predicted maturity benefit. In addition to this, you are also eligible for wealth boosters and loyalty additions, which increase your fund’s value.

Final Thoughts

Endowment plans are a reliable choice for individuals who want to combine life insurance protection with disciplined savings and guaranteed returns. They help you achieve important life goals such as retirement planning, children’s education, or wealth preservation, while ensuring that your loved ones remain financially secure in your absence. Along with attractive tax benefits under Sections 80C and 10(10D), endowment policies provide peace of mind and financial confidence.

Canara HSBC Life Insurance offers endowment solutions that are designed to meet your diverse financial needs with guaranteed benefits and robust life cover. By choosing us, you can be assured that your savings are secure and your family’s future remains protected, no matter what life brings your way.

Glossary

  1. Endowment plan: A combination plan of life insurance and investment with a death benefit and an assured lump sum if you survive.
  2. Surrender value: The accumulated amount the insurer pays to the policyholder upon termination of the plan mid-tenure before maturity.
  3. Cash Value: The amount that builds up in a life insurance plan over time and is available to withdraw as a loan. 
  4. Credit Check: It is the inquiry and search of your credit history to check whether you can repay your debts.
  5. Collateral: A valuable asset you agree to give to somebody if you cannot repay the borrowed money.
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Savings and Investment Plans from Canara HSBC Life Insurance

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