Future planning is a concern for everyone, and the sooner you start planning, the better off you'll be. The earlier you begin investing in your future, the more funds you'll have available to deal with your child's education, your retirement, and final expenses.

Some people are intimidated by financial planning, but you don't have to be an investing whiz to properly save for the future. If you know your options, you can set yourself up to have financial assurance instead of finding yourself selling off your possessions in a last-minute panic (to become more confident about your finances, check out these Top 25 Personal Finance Bloggers to Follow on Twitter).

One of the investing options it pays to know about are life insurance endowments. So let's go over what they are, how they work, and what other options you can consider.

Life Insurance Endowment Features

Life insurance endowments are specialized insurance products that pair a term life insurance policy with a savings program. Within these policies, you can:

  • Choose how much you want to save every month
  • Choose when you want the policy to mature
  • Choose how the money is used once the policy matures

How a Life Insurance Endowment Works

With a life insurance endowment plan, part of your premium goes toward the term life insurance and the other part goes into the savings portion of the policy. As long as you make your monthly premium, your life insurance endowment policy promises you:

  • A guaranteed rate of return on a specific date (policy maturity or death of the insured)
  • No investment risks
  • No interest rate risk

Those are great features, especially if you're particularly risk averse.

The reduced risk, however, comes with a reduced return. If you're more interested in increasing your savings potential and you're comfortable dealing with the fluctuations of the market, then a life insurance endowment might not be the right choice for you (though they can act as a bit of a cushion in your overall investment portfolio).

Financial Aid Eligibility

Another benefit is that using an endowment policy to fund your child's education does not count against financial aid eligibility. That is the biggest draw for these policies, since other investment vehicles, such as 529 plans, will count against financial eligibility.

Payout Amount

Your fixed monthly contributions will determine what your payout will be upon maturity. If you die before the policy matures, the fixed death benefit will be paid to the beneficiary.

A payout of the face value plus any bonuses from the investment portion is guaranteed upon the maturity date. But note that the portion above the face value is considered taxable according to the 1984 Tax Reform Act.

No Medical Exam

An endowment plan has one more advantage: it doesn't require a medical exam to purchase. If you have medical conditions that would affect your ability to get a good rate – or even get insured at all – then this could be a good avenue for you to pursue.

Other Options Worth Looking Into

Endowment plans offer a disciplined way to save money for future expenses, such as a child’s education and retirement. But as mentioned above, their safety means you're sacrificing higher returns. If you want greater returns while still minimizing risk, consider these alternatives.

Prepaid Tuition Plan

If you're concerned with your child’s education, this type of 529 plan helps lock in current tuition costs for a particular college. Instead of investing money for future costs, you are purchasing credits in future costs. Even if the actual cost of tuition doubles, you still have that tuition paid for at its original rate.

College Savings Plan

Another education option that opens the door to greater returns is a college savings plan. This is another 529 plan, but unlike prepaid tuition plans, you have more options for college choice. Investments are riskier when the child is younger, but the risk lessens as a child ages to secure the investment. You choose the risk you are willing to take.

Unit Linked Insurance Plans (ULIPs)

Unit linked insurance plans offer greater control over how your funds are invested. That might make them unappealing to casual investors, but it can be beneficial to those who know how the market works.

ULIPs generally give you the safety of a life insurance endowment plan but with a greater return. However, they leave you in the same situation: the returns are greater, but you still have to wait just as long to receive them.

Term Insurance and a Roth IRA

Some have advised purchasing term insurance and setting up a Roth IRA, effectively splitting up the two components of the life insurance endowment policy.

The thinking behind this is that the rate of return on a Roth IRA can be greater than those from endowment plans. One of the main reasons for this is how they are taxed. Since the Roth IRA is made with after-tax dollars, all distributions will be tax-free (if they are made under the guidelines set out by the plan).

Purchasing a term insurance policy along with Roth IRA contributions can be a cheaper route than an endowment plan and carry even less investment risk.

Think It Over

Life insurance endowment plans can be a great investment tool for those who are looking for a conservative saving and investing strategy. If you are averse to risk and are open to a lesser rate of return, this could be a good match for you. If, however, you're looking for more return on your investment, consider the other options listed above.

But whatever you choose, make sure you have something in place to help you out in the future.