Endowment insurance is a unique product that combines life insurance protection with long-term savings. While it’s commonly used for retirement planning, education funding, or wealth transfer, one of its lesser-known benefits is the tax advantage it offers under Nigerian tax laws.
What is Endowment Insurance?
An endowment policy pays a lump sum either at the end of a specific term or upon the policyholder’s death during that term. It provides both financial protection and disciplined savings, making it a smart tool for future planning.
Key Tax Benefits of Endowment Insurance
1. Tax-Deductible Premiums
Under Section 33(3) of the Personal Income Tax Act (PITA), premiums paid on life or endowment insurance policies are tax-deductible. This means individuals can reduce their taxable income by the amount of premium paid annually, thereby lowering their tax liability.
2. Tax-Free Maturity and Death Benefits
The lump sum received upon policy maturity or paid to beneficiaries upon death is not subject to income tax. This makes endowment insurance a tax-efficient way to save or leave a financial legacy.
3. Employer Contributions May Be Deductible
If a company provides endowment policies for employees, such contributions may be classified as allowable business expenses under the Companies Income Tax Act (CITA), helping the business optimise its tax position.
Additional Benefits
- Estate Planning: Endowment payouts go directly to beneficiaries without delays or tax deductions.
- Savings Discipline: The structured nature encourages long-term financial planning.
- Inflation Buffer: Bonuses or interest earned on the policy provide value growth over time.
Finally, endowment insurance offers more than just protection—it provides meaningful tax relief and a strategic way to plan for the future. Whether you’re an individual or a business, it’s a smart move worth considering.At Transparent Protection Ltd, we help you understand how to maximise these benefits. Contact us today for personalised advice on selecting the right endowment policy.
