Term Insurance vs Endowment Policy

The difference between a term insurance and an endowment plan is that term insurance offers pure life cover at affordable premiums, providing financial protection to your family in case of your untimely death. On the other hand, an endowment plan offers both life insurance and savings benefits, helping you build a maturity corpus if you survive the policy term. Simply put, term insurance focuses on protection, while an endowment plan combines protection with savings. Let’s understand term insurance vs endowment policy in detail:

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What Is Term Insurance?

Term insurance plan is a pure life insurance product that provides financial protection to your family members in case of your unfortunate death during the policy term. This payout is a death benefit which the nominee can choose to receive in a lump sum or at a regular payout.

Term insurance focuses purely on protection, it does not offer any maturity benefit if you survive the policy period. This makes it one of the most affordable ways to ensure your loved ones are financially secure, even in your absence. Term insurance offers high cover at low premium rates. Some companies also cover the partial or permanent disability of the insured.

Note: Now that you know that what is term insurance plan you can easily buy a term plan for your loved ones.

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@ Starting from ₹ 12/day⁺

What Is Endowment Policy?

An endowment plan is a policy that acts as an investment tool and a life insurance. In this, the nominee receives a death benefit in case of the policyholder’s unforeseen demise within the policy term. In case of survival of the policyholder, the total premium amount paid grows at a pre-fixed rate and in maturity, a lump sum payout is paid out. This dual benefit makes endowment policies suitable for individuals seeking both security and a disciplined way to save for future financial goals such as children’s education, marriage, or retirement. An endowment policy is widely popular, mainly because of the dual benefits it offers.

Now that we have understood what term insurance and endowment plans are, let us take a look at the difference between term insurance and endowment insurance.

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What are the Difference Between Term Insurance and Endowment Insurance?

Let us take a look at the difference between term insurance and endowment insurance:

Aspects	Term insurance	Endowment policy
Benefits Offered	Only insurance	Insurance + Savings
Sum assured	The sum assured offered is much higher than most types of life insurance plans	The sum assured is slightly lower than that offered with term plans.
Premiums	The term insurance premiums are much lower than most types of life insurance	The premiums are slightly higher due to the wealth creation benefits
Maturity Benefits	There are no maturity benefits offered with term plans. However, you can receive a refund of all the premiums paid with certain types of term plans in India	The maturity benefits will be payable as per the policy terms and conditions
Payout Modes	Term plans offer various term plan payout options like lump sum, monthly installments, or a combination of both	You can choose for the benefit to be paid in lump sum on top of the base sum assured
Rider benefits	Coverage can be enhanced of your term insurance plan with rider benefits such as critical illness cover, accidental death benefits, the return of premium benefit, etc.	Just like term insurance plans, coverage can be enhanced of your endowment plan with rider benefits such as such as critical illness cover, accidental death benefit cover, waiver of premium cover, etc.
Tax benefit	Available u/s 80C and 10D	Available u/s 80C and 10D
Withdrawal	Term plans don’t offer an option for withdrawals from the plan	Some endowment plans offer an option to withdraw in case of need.

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.

Wrapping Up

It is recommended not to mix insurance and investment. Mainly, the choice between the two comes down to your family needs and whether or not you are the soul-earning member of the family.

If you are the only earning member, term insurance promises better results for your family after your untimely demise. On the other hand, if there are other earning members in the family, an endowment policy will help you invest more and take a little risk.

Both term insurance and endowment policy have their pros and cons. It is up to you and your family’s needs that will help you make an ultimate decision.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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What is Term Life Insurance

FAQs

Q. Term plan vs endowment plan: What is the difference?

A term plan vs endowment plan comparison shows that a term plan provides pure life insurance, offering financial protection to your family in case of your untimely death. An endowment plan combines life cover with savings, paying out a lump sum either on death or at the end of the policy term. Term plans focus on protection, while endowment plans provide both protection and wealth accumulation.
Q. Which is better term insurance or endowment plan?

Choosing which is better term insurance or endowment plan depends on your financial goals. Term insurance is ideal for those seeking high life cover at affordable premiums to secure their family’s future. An endowment plan is suitable if you want a combination of life cover and a disciplined savings option for long-term goals like children’s education or retirement.
Q. Difference between term insurance and endowment insurance: How do they vary?

The difference between term insurance and endowment insurance lies in the benefits and purpose. Term insurance only pays the sum assured to the nominee if the policyholder passes away during the term. Endowment insurance pays the sum assured along with bonuses or accrued returns either on death or at maturity, providing both protection and savings.
Q. Can I get investment benefits with a term plan?

No, a term plan does not provide investment or maturity benefits. If you are looking for financial growth along with life cover, an endowment plan is the better option.
Q. Is a term plan more affordable than an endowment plan?

Yes, term plans are generally more affordable because they provide pure life cover without an investment component. Endowment plans have higher premiums as part of the payment goes toward building a maturity corpus.
Q. What is the 120% rule for endowment?

The 120% rule for endowments is a restriction on making additional contributions to an investment, where the new contribution can't exceed 120% of the higher of the previous two years' contributions. Exceeding this limit triggers a new 5-year restriction period on the entire policy. The first year of an endowment policy is typically exempt from this rule, allowing unlimited contributions.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

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