Endowment is a type of life insurance that has two benefits at once, therefore it is also known as endowment insurance. This type of insurance is indeed similar to unit linked which also has two benefits, namely life insurance and investment. However, the function of investing in unit linked insurance is only as a side function to help customers continue to be able to pay premiums and remain under policy protection.
Meanwhile, endowments are somewhat different from unit links. Endowments apart from being life insurance also have benefits as savings, not investments like unit links. And making a profit from savings on Endowment insurance is much smaller than investing in unit linked. However, the advantage is that savings in Endowments do not have investment risks as in unit linked investments. So that interest on Endowment savings will always be positive.
In addition, Endowment is basically a type of insurance that prioritizes the benefits of savings rather than life insurance. That is, when the policyholder dies before receiving benefits from savings in Endowment insurance, the savings can be disbursed as life insurance. However, if the policyholder is still alive after the insurance deadline has been met (10 years and over), then the policyholder will receive the savings which will be used according to their original purpose.
For example, Person A, who is 24 years old, decides to use Endowment insurance for a pension fund with a maturity of 25 years. But when person A was 34 years old, person A died. So that automatically person A will not use his insurance as his intention at the beginning. Then the Endowment insurance used by person A can be disbursed more quickly as life insurance.
Technically it is clearly very different from the unit link. Unit link is life insurance that has an investment option, so that investment profits can be used to help policyholders pay insurance premiums. That way, even if things happen to the policyholder that are not desirable, for example the policyholder is seriously ill and can no longer work, the unit-linked insurance policy can still be active through payments taken from the return on investment.
On the other hand, an endowment is a type of insurance that prioritizes the benefits of saving with the option of using it as life insurance. So when the policyholder dies before receiving the benefits of his savings. Then these savings can be disbursed and given to the family like life insurance in general.
Types of Endowments
Endowment insurance is basically the same as other types of insurance and has several types that can facilitate the various needs and needs of insurance customers. Some types of endowment insurance include:
1. Education insurance
Accumulated funds in Endowment insurance can be used to help prepare children’s education in the future. This type of insurance, the main focus is education insurance, but if the policyholder dies, the insurance can be disbursed earlier.
2. Pension insurance
Pension insurance means Endowment insurance used to prepare pension funds. Similar to education insurance, pension insurance can also be disbursed when the policyholder dies, as life insurance.
3. Civil servants insurance
This type of Endowment insurance is basically the same as insurance for pension funds. It’s just specifically aimed at customers who are civil servants. With a premium payment of 3.5% of the amount of salary and must be paid every month.
Advantages of Using Endowment Insurance
Even though it is the same as other insurance products, Endowment has several advantages that will benefit customers. These benefits can be in the form of bonuses given to insurance companies when policyholders do not withdraw insurance funds by the specified time limit.
In addition, funds that can be disbursed in Endowment insurance are not only savings funds from premium payments. But there are also additional funds from interest on savings and coverage provided by insurance companies. Because after all Endowment is dual-purpose life insurance, so coverage on life insurance will still be provided.
The difference between Endowments and Reserve Funds
An organization, company to the state in managing its finances has a major asset (which can be in the form of cash or other physical assets). These assets cannot be spent 100% of the time in just one budget year, but must be set aside for unexpected needs which are put into a special cash which is referred to as reserve funds or reserve funds. This reserve fund can be used in emergency situations where the money in the main cash is no longer sufficient to carry out operational activities.
This emergency situation varies greatly for each level of the organization, for example at the government scale, a reserve fund is needed to anticipate natural disasters, disease outbreaks, broken bridges, and economic recessions. Meanwhile, on a corporate scale, the use of reserve funds is useful if there are delays from suppliers who are forced to buy from other suppliers at higher prices, unexpected investments, sudden seminars, guest visits and so on.
The reserve fund is kept in a special cash which is liquid in nature, aka it can be taken at any time.
Meanwhile, the endowment is referred to as an endowment fund because its nature is eternal as much as possible alias lasts forever. The source of the funds comes from the corpus and is kept in the form of investment, be it in stocks, bonds or other forms of investment if it is in the form of cash. While the endowment is in physical form, for example land and buildings can be rented out.
