Choosing the right life insurance policy is crucial for securing your financial future and that of your loved ones. However, there is a range of life insurance options available in India. Customers should choose based on the various benefits offered by these plans and after acquiring a clear understanding of what they are looking for.
In India, two popular options are term insurance and endowment plans. While term plans are popular for their simple design and relatively lower premium rates, they mainly offer death benefit. Endowment plans, on the other hand, are popular for offering returns alongside a death benefit.
Whether you are looking for a new life insurance plan, or an add-on insurance to increase your coverage, these are two of the types you may consider. What you choose may depend on what you are seeking from your new policy.
Understanding the differences between a term plan and an endowment plan can help you make an informed decision.
What is Term Insurance?
It is a pure life insurance option offering financial protection for a specified term. If the insured individual passes away during this period, the beneficiaries receive a death benefit. Here are the main features of a term insurance plan:
Pure Protection: Term insurance provides only life coverage without any savings or investment component.
Low Premiums: The premiums for term insurance plans are significantly lower as compared to endowment plans.
No Maturity Benefit: If the policyholder survives the term, there is no payout.
What is an Endowment Plan?
It is a combination of insurance and savings. It provides a death benefit as well as a maturity benefit if the policyholder survives the policy term. The additional features may entail a higher premium as compared to term plans.
Key features of endowment plans include:
Dual Benefit: They offer both life cover and savings.
Higher Premiums: Premiums are higher compared to those of term insurance, because of the savings component.
Maturity Benefit: They provide a lump sum amount on survival of the policy term, which includes bonuses if applicable.#
Endowment Plans Vs Term Insurance - Differences
Let’s look at what these two have to offer and which one may be right for you.
Term Plan: Offers life cover at a low cost. Premiums are affordable, making it an attractive option for those seeking substantial coverage without high premiums.
Endowment Plan: Includes an investment component, leading to higher premiums. Suitable for those looking for insurance and savings in one plan.
Term Plan: Provides only a death benefit. If the policyholder survives the term, no benefits are paid out.
Endowment Plan: Provides both death and maturity benefits. On survival of the term, the policyholder receives a lump sum amount which can be used for future financial needs.
Term Plan: Offers flexibility in terms of sum assured and policy term. Ideal for individuals wanting high coverage at low premiums.
Endowment Plan: Less flexible due to the combined insurance and savings feature. Best suited for those looking for disciplined savings over the long term.
Here is a look at the differences summarised.
Feature
| Term Insurance
| Endowment Plan
|
|---|
| Purpose | Pure risk cover | Risk cover + savings |
| Premium | Low | High |
| Death Benefit | Yes | Yes |
| Maturity Benefit | No | Yes |
| Premium Payment | Only for risk cover
| For risk cover and savings
|
Suitable For
| Individuals seeking affordable life cover
| Individuals looking for savings plus insurance
|
Using Online Calculators
When looking at these plans, using a term insurance calculator as well as an endowment plan calculator can help estimate the premium required for the desired sum assured and policy term. These tools are valuable for comparing different policies and ensuring the coverage meets your needs.
Term Insurance vs Endowment: Which One to Choose?
Pitting term insurance vs endowment to choose one greatly depends on individual financial goals and needs:
You may like to opt for term insurance plans if -
You need substantial life cover at an affordable premium.
Your primary goal is financial protection for your family.
You have other investment avenues and do not need a savings component within your insurance.
On the other hand, you can choose endowment plans if -
You want a combination of insurance and savings.
You are looking for a disciplined savings approach with a lump sum maturity benefit.
You can afford higher premiums for additional savings benefits.
Understanding the difference between a term plan and an endowment plan is essential for aligning your insurance choice with your financial goals. Term insurance is ideal for those seeking cost-effective life coverage, while endowment plans cater to those looking for both protection and savings. Always assess your financial situation and future needs before making a decision.
# Bonus rate may vary from time to time based on Company’s Investment Performance.
Disclaimers: IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North Tower, Building 4, Nesco IT Park, Nesco Centre, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 18002098700. Email id: customer.first@indiafirstlife.com, Website: www.indiafirstlife.com. Fax No.: +912268570600. IndiaFirst Life Insurance Company Limited is only the name of the Life Insurance Company and ________________ UIN ____________ is only the name of the Life Insurance Product and does not in any way indicate the quality of the contract, its future prospects, or returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd under License. Advt.
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