Endowment Plan

Prepared by- Pooja Gupta

Definition
An Endowment Plan is designed to provide

a lump sum amount after certain specified

term or death of a person whichever is
earlier.
The insured gets the sum assured along
with bonus and guaranteed additions that
accrues during the term.
The sum is payable to the legal heir/s or
nominee named therein in case of death of
the assured. Otherwise, the sum will be
paid to the assured after a fixed period i.e.,
till he attains a particular age.

Cont.
In this plan the specified period will be ten,

fifteen, twenty years or up to certain age

limit for which assured has agreed.
Endowment Plan= Insurance + Savings

Types of Endowment Plan

Unit-linked indowment

This is a fixed term saving plan with an opportunity of life

coverage. In this plan your savings can be invested in market
shares thus the return you get from this completely depends
upon on the performance of your investment. If you are ready
to play with the market risks then this is the best option.
Full endowment

In Full Endowment plan, at the start of policy you will be

assured with basic sum which is also equal to death benefit.
However the amount you get at the end of maturity depends
on the annual growth rate. Actually your premium amount will
be pooled into companys or some other investment and each
year a bonus is added into your credit. Thus final amount paid
to you will be usually higher than the assured fund.
Unitised with profit endowment

This is a form of profit endowment where the value of units is

calculated annually and this value is guaranteed in order to
form a minimum return amount. This guaranteed sum remains

Cont.
Non profit endowment
As the name suggests this plan does not add any bonus for

the amount you pay as no sum is invested in shares. If you

are looking for a policy to pay off your mortgage then this
will not help you but,if you need only life coverage then you
can opt for it.
Low cost endowment
In this endowment plan the anticipated future growth rate of

the amount will meet the target amount and the guaranteed
life insurance element. In case of death, this target amount
will be paid as the minimum assured sum. Usually Low Cost
Endowment plan is used to pay off a mortgage and this is
the major advantage of this policy. However investor may
increase the premium amount to collect the enough money
to clear their mortgage.

Suitability
If a person is desirous of the following can take

endowment plansDual benefit of investment and insurance.

Long term investment and want to receive a lump

sum amount at the end of some years or maturity.

Ready to pay your premium in short period and
want to enjoy the benefits from the plan over the
policy term.
Interested in tax-free investments because as per
section 80C of Income Tax Act a person can enjoy
tax benefit on the annual premium and as per
section 10D death claim is completely tax-free.

Disadvantages
It is a low yield policy
The premium is relatively higher than a

term plan
The surrender value is lower than the
premium paid

Companies offering this plan

Kotak Life Insurance
Aviva Life Insurance
LIC

Estoppel

Definition
A legal defence tool used when someone

reneges on or contradicts a previous

agreement or claim. Estoppel prevents
someone from arguing something contrary
to a claim made or act performed by that
person previously.
Conceptually, estoppel is meant to prevent
people from being unjustly wronged by the
inconsistencies of another person's words
or actions.

Forms of estoppel
Equitable estoppel, which can prevent a

person from going back on his word, and

Collateral estoppel, which can prevent a
person from going back to court on the
same grievance. Collateral estoppel is used
to prevent legal harassment and abuse of
legal resources.
For example, if a mother states that a child
is not hers, estoppel could prevent her from
later trying to claim child support payments
from the child's father.

Estoppel in insurance
Estoppel prevents an insurance company from adopting

a position that is not consistent with a position it took

previously if it would result in injury to the insured. This
gives policyholders some assurance that their interests
will not be harmed when dealing with their insurer.
If

you send in a late payment for your insurance

premium, the insurance company cannot cancel your
insurance if it has established a pattern of accepting late
payments from other insured persons. This is because
you were under the impression that a late payment
would not lead to a policy cancellation, based on the
insurance companys behaviour of accepting late
payments from others without consequence.