Endowment Plan

Prepared by- Pooja GuptaEndowment Plan

DefinitionAn 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 PlanUnit-linked indowmentThis 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 endowmentIn 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 endowmentThis 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 unaffected from the market risks thus giving you relief. However the guaranteed amount is less than the actual value but if you want to escape from the volatility of market this is a safe investment.

Cont.Non profit endowmentAs 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 endowmentIn 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 plans-Dual 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.

DisadvantagesIt is a low yield policyThe premium is relatively higher than a term planThe surrender value is lower than the premium paid

Companies offering this planKotak Life InsuranceAviva Life InsuranceLIC

Estoppel

DefinitionA 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 estoppelEquitable 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 insuranceEstoppel 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.