A single premium endowment plan is a kind of savings policy that comes with a small portion of life insurance. You pay monthly premiums and contributions to your savings based on how much you want to get at the end of the plan’s term. Endowment plans are called “forced savings” because you have to pay your policy, or your premiums will end. But not all of the money you pay in premiums will go into your savings account.
Additionally, fixed deposit accounts and endowment insurance plans may look the same at first glance. Both kinds of savings options give you a choice of how long you want to save and how much you want to put away. But some big differences may make one way of saving money much better for you than the other.
Are Endowment Plans Better Than Fixed Deposits?
Here are some ways that Fixed Deposits and Endowment plans are the same and different:
· Identify Your Financial Goals
Before deciding on a savings plan, it’s important to know your saving and financial goals.
Among the worst things you can do with your money is not to save regularly. Making a budget and knowing how much funds you want to save will help you have unexpected expenses and be ready for other financial responsibilities in the future. This also lets you figure out how much money you must save. As a result, you will be able to determine whether to use an endowment plan or a fixed deposit.
You only need Rs.1,000 to start putting money into fixed deposits. On the other hand, there are no limits on how much you can invest in a single premium endowment plan. The bank uses the amount invested in figuring out the interest rate.
In general, the greater the amount invested in FDs, the greater the long-term return. However, in the event of an insurance policy, the payments differ from program to program. They are based on a set of parameters. For example, the amount of the policy, the policyholder’s age, the health of the assured, etc.
· For Short-Term Savings Plans
Fixed deposits and endowment plans can both help you reach your savings goals. However, their terms are different, so they are best for different goals. Fixed deposits, for instance, can have terms as short as one month and as long as 36 months. Because you can choose how long you want to save, they are great for meeting short-term savings goals. One of these short-term objectives could be paying for a child’s college tuition who is already enrolled or paying for her next month’s rent. Also, you can easily get your money out of fixed deposits if you need to because there aren’t many penalties for taking it out early.
· For Long-Term Savings Plans
On the other side, endowment schemes are usually viewed as a more disciplined savings. Since their money values are composed of non-guaranteed and guaranteed components, endowment insurance offers customers the choice of higher returns. Endowment policies with a minimum ten-year period are often utilized for long-term savings objectives. Investing in your student’s academic education, your dream home, or even your retirement are a few examples of investments.
· For Peace of Mind
An endowment plan is a form of life insurance that will protect you and lets you save money at the same time. This makes it possible to add things to the endowment policy, like the premium waiver rider. If the person whose life is insured gets very sick or can’t work, this rider means that they don’t have to pay any more premiums. So, the policy will not expire and will be kept going until it is paid off. This may give you peace of mind because you’ll know you can still reach your savings goals even if something unexpected comes up.
The GREAT SP Series 6 of Great Eastern is a short-term endowment plan. It assures a return of 1.68 per cent per year for three years. This is a good substitute for fixed deposits and is only available for a limited time. It is a non-participating endowment policy with guaranteed annual returns of 1.68 per cent p.a. when it matures.
Both a fixed deposit and an endowment plan are ways to invest, but each has its own goal. An FD is a genuine investment product that enables you to save for the future. Also, develop a habit of saving money regularly. However, a single premium endowment plan is a set of insurance that helps you make sure you have enough money to deal with any unplanned events in your life.
If you are searching for the best single premium endowment plan, you can consider great Eastern’s endowment plan. Further, the GREAT SP Series 6 of great Eastern’s is one of the best endowment plans you can go for.