Owing to the pandemic as well as the availability of a vast number of options, insurance plans are becoming increasingly popular across the UAE and the world. These insurance plans cater to different types of requirements related to health, vehicles, home, etc. Notably, insurance plans are also available if an individual want to secure their family’s financial future even in their own absence. This can be done with the help of term insurance.
However, if you seek more features with term insurance plans, you can now do it easily with Endowment plans, which are a special type of savings plan offered by banks and insurance companies. These plans can be considered to have 2 components - a savings plan and life insurance or a death benefit.
Read below to check out more features of endowment plans in the UAE and some specifics related to leading endowment plans in the UAE.
What is an Endowment Plan in Insurance?
An endowment plan in insurance is designed to provide financial security in the event of a death in the family like a term insurance plan. If an individual takes the policy, a lump sum is paid to their nominees in the event of that individual’s death within the policy term. However, if the policyholder is alive at the end of the fixed tenure of the plan, they still receive the lump sum along with any other amount as specified in the policy.
Major Features of Endowment Policies in UAE
The following are the key features of endowment policies in the UAE.
Endowment plans are fundamentally insurance plans that offer financial protection to the policyholder and their beneficiaries in the event of their death or disability
The premiums are usually fixed and don’t increase irrespective of the policyholder’s age
Similarly, the benefits paid out are mostly fixed - these factors ensure financial stability even under adverse events
How Do Endowment Policies Work?
When you purchase an endowment investment policy, you are required to make a series of regular payments (monthly, quarterly, or annually) to the insurer. In return, the insurer pays you a guaranteed sum of money (the assured sum) either on the maturity of the policy or on the death of the policyholder during the term of the policy.
The vital thing to remember here is that the sum assured will only be paid out in the case of the policyholder’s demise. So if the policyholder lives beyond the term of the policy, they will get back their premiums plus any investment returns made on the same by the insurer.
Advantages of an Endowment Policy
Crucial assistance against the financial impact of a death
Endowment funds work by providing financial stability for individuals by combining the best of term insurance and savings plans. Generally, the funds collected from endowment plan premiums are invested in a variety of stocks, bonds, debts, and other investment vehicles.
This feature allows the generation of steady profit on the funds, which can also lead to better financial security for the policyholders. These plans prove especially helpful when an earning individual faces untimely death, as no compromise is required with other finances if such a plan was taken before the demise.
Difference Between Term Plan and Endowment Plan
A term plan provides life insurance coverage for a specific period
An endowment plan provides a lump-sum amount upon the policyholder's demise or the maturity of the plan
Term plans don’t offer cash value
Endowment plans have a cash value that grows over time and can be withdrawn or have a loan borrowed against it
Term plans only provide death benefits
Endowment plans offer both death and maturity benefits
What are Term Plans and Endowment Plans?
Both term plans and endowment plans are life or term insurance plans that offer death benefits. The key difference between the two lies in the fact while the associated benefits of a term policy expire after the specified (if the policyholder is alive at the maturity), those provided with endowment plans continues until the policyholder dies. While some term plans may provide a certain amount after maturity if the policyholder is alive, most of them lack such provision.
Endowment plans, besides paying out a death benefit, also build up cash value over time. And if the insured person is alive at the plan maturity, they can get the assured sum (or even more with the interest), thus able to access benefits in both cases.
Term plans are usually preferred by people wanting coverage for a specific period of major investment, say the length of a mortgage. Endowment plans, on the other hand, are generally opted for by people wanting lifelong coverage along with the convenience of savings in one place. Endowment plans are also chosen by people willing to pay higher premiums for the added cash value benefit.
Which is Better - Term Insurance or Endowment Plan?
There is no specific answer to the question, as the best plan for you depends on your financial preferences, goals, and current conditions. However, the factors illustrated in the table below can provide an approximate idea to start comparing the two plans for your consideration.
Term plans are cheaper than endowment plans but do not offer cash value
Endowment plans have a cash value that grows over time and can be used for withdrawal or borrowing against it
Term plans are better for those who want insurance coverage for a specific period of time
Endowment plans are better for those looking to secure their family's financial conditions in the event of their demise (and avail of benefits after the maturity)
Best Endowment Plans in the UAE in 2022
With several companies in the UAE providing endowment insurance plans, the question of which plan is the best for you cannot have a set answer. However, you can research more about the types of endowment plans in the UAE and the pros and cons of all of them.
Some endowment plans you can consider availing of in the UAE in 2022 are:
Alliance UAE Endowment Assurance Platinum Plan: With the option of policy payment in the range of 1 to 5 years (or even lump sum), this plan provides the assured sum and the applicable bonuses at the time of maturity of the policy. In case of the demise of the policyholder during the tenure, it easily provides the assured sum to the family.
PIB Endowment Plan in UAE: This endowment plan, provided by Platinum Insurance Broker LLC, is among the leading endowment plans in the UAE. It provides the complete assured sum if the policyholder dies and a lump sum amount if the policy matures in the insured person’s lifetime – all at minimum hassle.
Benefits of an Endowment Plan in UAE
In cases of the policyholder’s death, the nominee receives the entire sum which ensures the availability of resources in such critical times.
Some endowment plans also have the provision for payment in the case of total and permanent disability (TPD) of the policyholder.
Endowment plans also bring the option of savings at competitive rates in one place.
Several endowment plans include a waiver of future premiums in the event of permanent disability.
Who Should Buy an Endowment Policy?
As per financial experts, people with a steady income who require a lump sum of cash along with term insurance can easily buy an endowment policy. It should be noted that as an endowment is a long-term financial plan, with policy terms going up to 5-10 years, the overall risk on the invested amount becomes negligible.
Consequently, if any person wants to avail of term insurance to safeguard their family but also reap benefits at the end of the policy, they can opt for endowment policy plans in the UAE. It is suggested that an individual interested in such plans should start earlier, as the premium may be higher with an increase in age.
Are Endowment Policies a Good Investment?
While this depends on how the investments perform, the answer is yes in most cases. Endowment policies are generally good investments as they provide the policyholder with assured money (plus an applicable bonus) after maturity. Moreover, the provision of immediate financial assistance via the lump sum amount in case of the policyholder’s demise is itself an excellent investment in the financial future of their family
Things to Consider Before Buying an Endowment Policy Plan in UAE
It is recommended to perform a thorough endowment plan review before buying an endowment policy. The endowment plan review will help you understand the policy and its features so that you can choose the best endowment policy as per your requirements and future goals. Given below are some of the important points that you should know regarding an endowment plan review.
Tenure: You should always examine the applicable term period of your endowment policy plan. While a longer tenure may provide you with coverage for a longer term or more benefits at maturity, you may also have to pay more amount over the course. Choose the tenure of the endowment plan of your preference after considering these factors.
Premium and the assured amount: Another aspect to look for in endowment policy plans in the UAE is the premium and the sum assured with the plan. While a higher premium may bring more advantages in the future, this could prove burdensome if you have immediate financial requirements. Similarly, the assured sum should be gauged after proper financial planning of your expenses and future plans like children’s education, purchase of a house, etc.
Other benefits: Several endowment plans provide various other benefits besides the term coverage and maturity benefits like assured sum if the policyholder becomes permanently disabled and so on. One should carefully read the terms of the policy and enquire regarding such benefits.
The plan provider: In case the family of an individual requires immediate financial help in case the said individual passes away, minimum hassle should be present in securing the amount. As this is made possible mainly by the leading insurance providers in the UAE, you should verify the settlement ratio and other such metrics of the plan provider as well as their reputation.
How to Apply for Endowment Plans in UAE?
Owing to the advancement of technology, one can easily apply for an endowment plan in the UAE online from the comfort of their home. However, the other option of going offline is always open. Consequently, an individual can apply for the plan of their choice as per their preference.
Whether going online or offline, the first step is to contact the provider through their physical branch or website and obtain the application form. After filling it out and attaching (or uploading) necessary documents, one can submit them and wait for approval. If the eligibility criteria are met, the applicant is contacted by the provider for further steps.
Documents Required for Endowment Plans in UAE
During the application process for endowment plans, the provider will request a few documents from the applicant. While the list of required documents may vary, the following documents are generally asked for by a majority of providers in the UAE.
Valid Visa and Passport
Completed application form
Proof of salary (bank statements/salary slips)
Endowment Policy Premium Calculator
An endowment policy premium calculator is an online tool that helps the policyholders calculate the value of their endowment insurance plan for a given tenure. These calculators provide details like the required premium for a certain assured sum and so on, which help users get an approximate idea regarding the investment from their side and the actual benefits available.
To recap, an endowment policy is a life insurance plan that pays out a lump sum upon maturity besides serving as a term insurance plan during its tenure. As it is a long-term investment, the policyholder should select one that best suits their financial needs. Endowment policy plans make for an excellent choice for those looking to provide financial security for their family, both in their presence and absence.
Here are some quick facts to know regarding endowment plans in the UAE.
What is the difference between lump-sum and regular endowment?
The difference between an ordinary endowment insurance plan and a lump-sum endowment insurance plan is that you are not paid an annual or a monthly amount for the latter. Instead, you receive a one-time lump sum at maturity.
How to calculate the value of endowment policy?
An endowment calculator can be used to calculate the value of a lump sum or partial claim under an endowment insurance plan.
How to find out the best endowment policy?
An endowment plan is considered the best when it offers the highest sum assured for a given premium besides fulfilling your specific requirements. Consequently, the suitability of an endowment policy plan in UAE depends on its users and their financial needs.
Are endowment policies a good idea?
Yes, endowment policies can prove helpful as they help your money grow while also providing term insurance in one place.
What is the difference between a term plan and an endowment plan?
Term insurance plans usually provide the assured sum if the policyholder passes away during the tenure of the period. On the other hand, an endowment policy plan provides the same benefit as a term plan along with the feature of an assured sum even if the policyholder is alive by the end of the plan’s tenure.
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