Term Insurance vs Endowment Policy

Term Insurance plans offer high life cover at affordable premiums and are meant for protection against death, while endowment plans combine insurance with savings and provide a payout upon death or maturity. The purpose of term insurance is to protect your loved ones in your absence, and endowment insurance is to protect your loved ones along with building your wealth. Understanding the difference between the two can help you align your choice with your financial goals, risk appetite, and long-term planning needs.

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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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₹75
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@ Starting from ₹ 12/day⁺

What Is an Endowment Policy?

An endowment plan is a type of life insurance policy that combines protection and savings. Under this, the nominee receives a death benefit if the policyholder dies during 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 is 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
Purpose	Focus only on protecting beneficiaries financially in case of the policyholder’s death	Provides insurance cover along with a disciplined savings component.
Goals Served	Only insurance	Insurance + Savings
Coverage	Provides life cover only, no maturity benefit	Offers dual coverage of insurance and wealth creation through 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 options	Term plans don’t offer an option for withdrawals from the plan	Some endowment plans offer an option to withdraw in case of need.
Suitability	ideal for individuals prioritizing high coverage for a lower cost	suit those looking for safe, risk-averse savings combined with life cover

Note: It is recommended to calculate the term plan premium using theterm insurance calculator before buying.

How To Choose Between Term Insurance and an Endowment Plan?

Choosing between a term insurance plan and an endowment plan begins with understanding how each one works. The right option depends on your current financial situation, future goals, and the kind of benefits you expect. Instead of comparing premiums alone, a thoughtful evaluation of features and outcomes helps you pick a plan that truly fits your needs.

Financial Goals
Start by identifying your primary goal: pure life cover, long-term savings, or a balance of both. Once you're clear on this, it becomes easier to align your needs with each plan's features, making your decision more purposeful.

Future Expenses
Review your monthly and annual expenses, including existing commitments and lifestyle costs. Also consider future responsibilities and inflation. This gives you a clearer idea of whether a low-cost term plan or a higher-premium endowment plan suits your financial situation.

Affordability
Premium payments need to be consistent to keep your policy active. Term plans are generally more affordable, while endowment plans require a higher financial commitment. Choose a plan that comfortably fits your budget to avoid future disruptions.

Risk Appetite
Your risk appetite also plays an important role when choosing between an endowment policy vs term insurance. If you prefer a protection plan without investment elements, term insurance is suitable. If you are open to moderate risk for potential savings benefits, an endowment plan may work better.

Liquidity Needs
Evaluate whether you may need access to funds during the policy term. Endowment plans may allow partial withdrawals after a certain period, offering some flexibility. Term insurance, however, focuses purely on protection and does not provide liquidity during the policy term.

In simple words,

Choose a Term Plan if: You are the primary earner, have dependants, and want maximum life coverage for a minimal cost.

Choose an Endowment Plan if: You want a guaranteed, risk-averse, long-term savings plan with a safety net.

Both plan types offer tax benefits under Section 80C, and payouts are generally tax-exempt under Section 10(10D)

Wrapping Up

Choosing between term insurance and an endowment policy depends on your financial goals and protection needs. If you want high life cover at an affordable premium, term insurance is the ideal choice. On the other hand, an endowment plan is suitable for those looking to combine life insurance with long-term savings. Instead of looking for the best option, focus on what aligns with your budget, risk appetite, and future goals. A well-informed comparison helps you select the right plan for complete financial security.

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. What is the difference between a term plan vs pure endowment plan?

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. 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 limits additional contributions to an investment to 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.
Q. Can I get tax benefits from both endowment and term plans?

Yes, both endowment and term insurance plans offer tax benefits under Sections 80C and 10(10D) of the Income Tax Act, subject to applicable conditions.
Q. Which plan is better for long-term wealth creation?

Endowment plans are generally better for long-term wealth creation because they combine savings benefits with life insurance coverage.
Q. Are term plans suitable only for financial protection?

Yes, term plans are primarily designed for financial protection, providing high life cover at affordable premiums.

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Author's Bio

Varun Agarwal Head - Term Insurance

Varun has spent years in the insurance space, but what drives him isn't policies or premiums — it's the conversations he's had with real people. A young father in Pune wondering if his salary is enough. A newly married couple in Jaipur putting off "the insurance talk" for later. A mother in Chennai who never knew her husband was underinsured until it was too late.
These stories stay with him. As Head of Term Insurance at Policybazaar, Varun knows the numbers well — 52.4% of Indians are aware of term insurance, yet only 9.6% own it. And 87% of families don't realise they're leaving their loved ones with far less protection than they actually need. But behind every statistic, he sees a family that just needed someone to sit with them, explain it simply, and help them take that one step. That's exactly what Policybazaar's term insurance is built to do. In his words, "Most people aren't avoiding protection — they're just waiting for someone to make it easy. That's what we're here for."

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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. ₹361/month is the starting price for a ₹1 crore loan cover with an 8% interest rate for an 18-year-old male, non-smoker, with no pre-existing diseases, loan tenure up to 20 years, rounded off to the nearest 10

+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

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

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Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.

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