Prices Increasing soon Prices Increasing Soon

Why Is Term Insurance Better Than An Endowment Plan?

Nowadays, having life insurance is a necessity. But one of the major concerns faced by every customer while choosing a life insurance plan is whether to buy a term insurance plan or an endowment plan. Both the plans are traditional insurance plans and offer comprehensive life cover along with tax benefits. However, some differences also exist in both plans.

Read more
Gets ₹1 Cr. Life Cover at just
COVID-19 Covered
The Policybazaar Advantage
Dedicated claim support for family FREE
Upto 10% discount for buying online
Only certified experts will call you on 100% recorded lines
We are rated~
6.7 Crore
Registered Consumers
Insurance Partners
3.4 Crore
Policies Sold

#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply

By clicking on "View plans" you agree to our Privacy Policy and Terms of use

~Source - Google Review Rating available on:-

Life is Unpredictable! Protect your family’s future
Get ₹1 Crore Life cover starting from ₹384/month+
We don’t spam
Check Your Premium Now
Please wait. We Are Processing..
Get Updates on WhatsApp
The Policybazaar Advantage
Policybazaar Advantage Icon
Dedicated claim support for family FREE
Policybazaar team will help and support you at the time of claim. A personal claim handler from our team of experts will get in touch with you when your nominee applies for a claim on our website.
Policybazaar Advantage Icon
100% calls recorded to ensure no mis-selling
We will make sure you get what is promised by the advisors. We conduct regular monitoring of our calls to make sure you get the best experience.
Policybazaar Advantage Icon
Exclusive lifetime discount upto 5% for buying online
The discounts will be valid for the entire policy payment term and is not available if you choose to buy the insurance through offline agents.
Policybazaar Advantage Icon
Advisors available in your city
Our advisors are available in more than 55 cities across India and can help you at your doorstep in understanding the plans and in documentation.
Policybazaar Advantage Icon
Refund at the click of a button
In case you aren’t happy with your purchase, you can cancel your policy hassle-free at the click of a button. We will help you with the cancellation and refund of your policy.

Let’s understand these differences: 

Term Insurance And Endowment Plans 

Financial planning is very important at the early stages of life. It helps you to save and build a protected and a secured financial future for your family. However, knowing the correct balance between investment and insurance is crucial at the time of managing the finances. The topmost priority in financial planning is securing their families. Hence, it is a smart decision to invest in life insurance that helps you to be financially secured. In this article, we will be discussing if term insurance is better than an endowment plan? Two insurance policies instantly come into mind when thinking about the financial future goals are term insurance and endowment plans. 

  1. Term Insurance 

    Term insurance is a pure financial protection plan that offers cover for a limited period. If the policyholder dies during the policy term, then he/she is entitled to receive the death benefit in terms of a pre-specified lump sum amount. 

  2. Endowment Policy 

    Unlike term insurance, an endowment policy is a combination of insurance and investment, offering protection in financial emergencies. The offered life cover is called as sum assured amount of the endowment plans. 

Why Is Term Insurance Better Than An Endowment Plan? 

Listed below are the points discussing the difference between term insurance and endowment plans: 

  1. Premiums 

    A term insurance plan offers security from risks without any additional investments. Hence, the premium prices of the term insurance plan are low which are required to be paid by the policyholder at regular time intervals. Whereas, endowment plan has maturity benefits which relatively increase the premium prices. It also comes with an add-on that further makes the premiums costlier. The term insurance plans are more cost-effective and economical than the endowment plans. 

  2. Sum Assured 

    Sum assured is a pre-decided amount that the insurer agrees to pay to the policyholder or his/her nominee if an insured incident happens or at the end of the term plan. Assured can determine the sum assured amount at the time of purchasing the term insurance policies. The sum assured in the term insurance plan is higher than the sum assured of the endowment plan. This means that a policyholder is required to pay a high amount of premiums to receive more sum assured amount in an endowment plan. 

  3. Death Benefits And Maturity Benefits 

    In maturity benefit, the policyholder receives the decided sum assured amount along with the additional bonus, if the life assured survives till the expiry date of the endowment plan. Term plans do have maturity benefits but only have death benefits for beneficiaries. However, endowment plans offer both – Death and Maturity Benefit. 

  4. Insurance Vs. Investment 

    One of the major differences between a term and an endowment plan is the nature of the plan. A term plan is a pure life protection plan that provides no such add-ons cover, but endowment plans are a combination of insurance and investment that allows you to save for your future objectives. On the other hand, term insurance plans provide no options for long-time savings. Like, if you purchase a term insurance plan, the death benefits will be received by beneficiaries in case of your unfortunate death. In the endowment plan, you can get the complete corpus that you have paid overtime at the end of the policy. 

  5. If The Policyholder Passes Away

    In a term insurance plan, death benefits are provided to the beneficiaries in case of the policyholder’s untimely demise. The guaranteed sum amount is higher in term insurance and the received amount helps the family to meet their expenses. Endowment plans also offer death benefits but the sum assured amount not necessarily is adequate for completing financial requirements. 

  6. Add-On Features 

    Riders are the additional features for which you will have to pay an extra premium if you want to buy them. Both plans, term and endowment plans offer riders. But certain riders are available only with the term insurance plans while some are only available with endowment plans. And both plans offer critical illness, accidental death rider, premium waiver, and hospital cash. All the life insurance plans offer tax benefits as per the prevailing laws of the Income Tax Act, 1961. Therefore, the exemptions on tax are higher in the case of endowment plans when compared to the term insurance plans. 

Term Insurance Vs Endowment Plans - What Should I Buy And Why? 

Both plans have their disadvantages and advantages but the selection depends entirely on your requirements. In the below section, we are going to discuss whether a term insurance plan is a right buy or an endowment plan. Here’s a quick laydown: 

As we have discussed above, the premium amounts are lower as compared to the endowment plans. It simply means, that if you buy a term plan of Rs.1 Cr cover, the premium amount of this cover will be lower than the premium amount you pay in the case of an endowment plan. 

Endowment plans deduct the mortality amount and other charges and only return the amount that remains to the life assured at the time of maturity. Sometimes, the returns provided by the endowment plans are much lower than the total premium paid towards the entire policy. 

A term plan offers death benefits, and on the other hand, endowment plans offer both maturity and death benefits. Thus, both term and endowment plans provide a sum assured amount to the beneficiaries in case of the policyholder’s demise during the policy time. Endowment plans are beneficial for savings purposes whereas term insurance plans are ideal for those who are looking out for higher coverages at low premium prices, thus provides financial protection to your family in case of your absence. Buying pure life insurance is a smart option when your foremost concern is your family’s protection. 

The Final Words! 

When it comes to your family, their financial protection is your priority. Being a sole earning member of the family, a term insurance plan offers you a sufficiently large amount that can help his/her family for the long term. Term insurance plans are more economical and pocket-friendly than endowment plans. The selection of the right insurance plan depends entirely on your financial requirements and future objectives. Choose your plan smartly for a better tomorrow.

Different types of Plans

Premium By Age

Term insurance articles

Recent Articles
Popular Articles
PNB MetLife Saral Jeevan Bima Review

07 Sep 2023

“I have opted for Term insurance plan of PNB MetLife. This is
Read more
Policybazaar's Insurance Advisor: Your Smart Path to Protection

17 Aug 2023

Policybazaar’s Insurance Advisors are IRDAI certified experts
Read more
ICICI Pru Saral Jeevan Bima

25 Jul 2023

ICICI Pru Saral Jeevan Bima is a simple term insurance plan that
Read more
HDFC Life Smart Protect Plan

19 Jul 2023

HDFC Life Smart Protect is a term insurance plan that offers
Read more
Canara HSBC Young Term Plan

03 Jul 2023

Canara HSBC Young Term Plan is a comprehensive pure protection
Read more
Term Insurance for Women in India
Term insurance for women is a type of life insurance specifically designed for fulfilling women’s needs and
Read more
LIC Term Insurance 1 Crore
LIC of India offers various plans to help you secure the financial future of your loved ones. In order to make
Read more
What Are The Medical Tests Done For Term Insurance
Term insurance offers a sum assured to the beneficiary of the policyholder upon their death that can help them
Read more
TATA AIA Smart Sampoorna Raksha Param Rakshak Plus
TATA AIA Smart Sampoorna Raksha Param Rakshak Plus is a comprehensive life insurance policy for individuals
Read more
2 Crore Term Insurance Plan
The pandemic has surely generated a global panic and emphasised the importance of financial planning that would
Read more

View Plans
Download the Policybazaar app
to manage all your insurance needs.