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If one is looking out for a life insurance policy, it is best to know the difference between term insurance and endowment policy. These 2 financial tools may appear the same but in reality, they are completely different terms.
As a person searching for a suitable life insurance policy, it is necessary to know the difference between term insurance and endowment policy.
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In this article, we will focus on the difference between term insurance and endowment policy, but first, let us briefly understand these 2 terms separately for better understanding.
Term Plans
Term insurance is the purest form of insurance that you can buy for yourself and secure the future of your family after your untimely demise. It is a life insurance policy that provides financial coverage to the nominee in the policy if the life insured dies untimely.
Among all the life insurance policies, Term insurance offers the highest coverage with minimal premiums. Some companies also cover the partial or permanent disability of the insured. Term insurance is the only plan that comes under pure risk.
Note: Now that you know that what is term insurance plan you can easily buy a term plan for your loved ones.
Unlike term insurance, an endowment policy is an insurance plus investment instrument. It offers both, protection in the time of crisis and growth of money invested in the policy. If survived during the entire policy tenure, you get the sum assured amount at the time of maturity.
An endowment policy is widely popular, mainly because of the dual benefits it offers.
Now, as you have an idea of both term insurance and endowment policy, let us look into the difference between the two.
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The following table will help you gain perspective when it comes to the difference between term insurance and endowment policy.
|
Aspects |
Term insurance |
Endowment policy |
|
Type of Plan |
Term insurance is a sole risk coverage plan. It protects the financial future of your family and loved ones in case of your untimely demise. |
Endowment plans are a mixture of both insurance and investment. |
|
Coverage |
Covers uncertainties of life |
Combines insurance + investment |
|
Ideal for? |
An absolute must financial tool for everyone |
An investment tool for customers who wish to grow their money along with availing protection |
|
Premiums charged |
Term insurance is the most affordable life insurance product available in the market. |
Endowments plans tend to have slightly higher premiums compared to term insurance plans in India. |
|
Maturity benefit |
No maturity benefit is associated with term insurance |
There is maturity benefit available. This benefit is paid at the end of the policy period |
|
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 |
|
Death benefit |
Only the death benefit is offered by term insurance |
Death and maturity benefits both are associated with endowment plans |
|
Sum assured |
Sum assured as the death benefit is mostly 15-20 times the annual income of the policyholder |
Sum assured as maturity benefit is not great but sufficient to be used as a good investment option |
|
Liquidity |
Term insurance does not offer any liquidity. |
Endowment plans allow partial withdrawal of the sum assured amount in case of financial emergencies. |
Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.
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.
˜Top 5 plans based on annualized premium for bookings made on https://www.policybazaar.com in the first 6 months of FY 24-25.
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
+Rs. 487/month (Rs.16/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 38 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
We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881
For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale
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+Rs. 820/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 38 years of age.
+Rs. 1,443/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 38 years of age.
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