In today’s fast-going life, it is all uncertainty that anyone might face in the future. Nowadays, we are available with plenty of financial tools to secure our future in terms of investments and savings. These protect our family in times of adversity- the insurance policy takes care of a family during misfortunes.
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Are you interested in availing yourself of a life insurance policy?
Experts advise researching the different types of insurance policies avail in the market. You should ensure choosing the insurance policy according to your financial needs.
Are you wondering about a term insurance plan or an endowment plan? See both are suitable for life insurance coverage. Term insurance plan comes to protect your family in case of death happens to any individual, at the same time, an endowment plan is meant to give protection to a family along with building wealth.
It is always your choice to consider which insurance plan is the best for you. Looking to secure your family in terms of finances, it is a life insurance plan that suits you perfectly. If you like to build your wealth, go with an endowment plan, it will not disappoint you. It is advisable to study these plans and compare these according to your needs for future benefits.
In this blog, we’ll figure out some points of difference between Term Insurance Plans & Endowment Plans. Before we dive into these terms, let’s understand each term individually.
What is Term Endowment Plan Plan?
The term life insurance is popular among the other types of insurance policies. Term plan is 100% product of life insurance which is made to provide financial assistance to your beloved family in case of any death occurs to the insured person. With a term insurance plan-under no circumstances your money will not be liable to grow.
The family is entitled to get the benefits in terms of a pre-decided lump-sum amount. The name is so-called because, in India, this is one of the most sought types, an individual can have it for a specific period-10, 20, 30, and so on. In comparison to other insurance policies, it is considered much cheaper.
Term insurance plan doesn’t offer maturity benefits!
What is an Endowment Plan?
So here comes another famous product of life insurance known as the Endowment Plan. It has dual benefits of investment and insurance; it not only offers individual life coverage but is also meant to help an individual save money regularly over a period to receive a lump-sum amount of maturity.
The best part of an endowment policy is- it is useful to fulfill long-term goals and if the insured survives the policy tenure, the maturity amount is receivable. If any death occurs to the insured, the nominee is liable to get the sum assured, and a bonus as well, if any.
Being one of the most appropriate types of plan, it allows insured ones to build financial wealth for their family to meet different financial goals in life.
How do term Insurance and Endowment Plan differ from each other?
Sure, these two plans are different. Each one has its benefits and one can opt for any one of the two according to his/her requirements. An individual who seeks to secure his/her life in financial terms looks forward to protecting the life of a family at times of catastrophe.
Let’s make it simple to understand the points of differences between the two-
|Term Insurance Plan||Endowment Plan|
|Served Objectives||Solely insurance||Dual benefits- insurance+savings|
|What covers||A term insurance plan offers life coverage|
|Sum assured||The death benefit could be 15- 20 times the annual income of the insured person||The matured benefit is not too much but enough for the investment option|
|Price||As a term plan offers a single benefit, thus premiums are low||As an endowment plan offers insurance and savings benefits, hence has higher premiums|
|Benefits of maturity||No maturity benefits-it just offers life coverage to protect your family||At the end of the policy, it offers a fixed amount-a combination of accumulated returns on the invested premiums and bonuses|
|Benefits of rider||On the payment of more premiums, you can add extra benefits also. The benefits provide extra financial assistance on your behalf in case of- Accidental physical disability and accident-critical illness||On the payment of more premiums, you can add extra benefits. The benefits provide extra financial assistance on your behalf in case of- Accidental physical disability and accident-critical illness|
|Benefits on tax||Get the tax benefits- Claim the deductions of the premiums paid by you, under section 80C deductions could be up to 1.5 lakhs yearly. As no maturity benefits, still, the sum assured is exempted under section 10(10D) subject to the conditions mentioned.||Get the tax benefits- Claim the deductions of the premiums paid by you, under section 80C deductions could be up to 1.5 lakhs yearly. under section 10(10D), the sum assured, and maturity benefits received under this plan are exempted.|
|Options on withdrawal||Its offers’ no withdrawal’||Offers a withdrawal in an emergency|
Between Term Insurance & Endowment Plan, which one is better?
Many people think of mixing the need for insurance to meet the goal to invest and build money-resulting, facing difficulty in paying the premiums or might end up discontinuing the plan. The insurance plans are available for you depending on your financial goals. Many financial experts suggest the insurance plan should never be mixed with any other financial goal. Hence, it is clear about the term insurance plan suits the best than the endowment plan.
Having endowment plans to invest money in the stock market or any other investment platform, the returns are according to the market moves. It is clear for no-guarantee returns for endowment plans as a result there may be times of getting low returns than expected in endowment plan offers. Another point of concern is the premiums, endowment plans’ premiums are comparatively higher than that of term insurance. To get more effective returns do not mix investment and insurance- experts advise.
If you plan to have an endowment plan to invest money in other platforms-be ready to pay more premiums towards insurance and investment too if having an endowment plan to invest money in other platforms. On maturity, the insured one might be left with the remaining amount after the deduction of mortality and other charges. Sometimes, these endowment plans offer low returns in comparison to the premiums paid towards the same.
Many market experts recommend opting for a pure insurance plan in case securing your family is the prime goal. Likewise, if you already have a term insurance plan and seeking investment avenues, consider an endowment plan for the best.
Read more about- What is Term Plan?
How to pick between Term Insurance & Endowment Plan?
It is very important to get yourself familiar with the difference between the duos. It would be very easy to select between term insurance and an endowment plan once you understand the clear difference. The next step is to analyze how these two influence your financial condition. The followings are some points to keep in mind to make a pick between term insurance and an endowment plan-
- Financial Goal- Everyone has a lifestyle to live, and it all needs to affect our lifestyle considerably. According to your requirements, map your best interest with clarity to opt for either term insurance or an endowment plan. Try questioning yourself which would give you the best, insurance or investment, or a combination of both.
- Budget- As mentioned above, due to the benefits, both term insurance, and an endowment plan vary in terms of buying. You can decide which one is suitable for you to buy by understanding your financial status. Every single person has a budget so keep that in mind to select. It will also assist in determining the sum assured that is enough for your family with either of the two. You may be unable to keep the policy in force in case you end up over-estimation the sum assured. Hence, you are at risk to lose precious savings and benefits as well.
- Life Goals- Setting life goals in terms of financial plans is an important factor. When are close to sure what you want after 10, 20, or 30 years, you can precisely decide between term insurance and endowment policies.
Compare life insurance and endowment plan to understand how to spend the money for better returns. It is a process to identify the financial requirements in your life. Consider these two as a checklist before you make any important adjustments to a financial plan. After all, it’s your money your decision.
Q- What are the types of life insurance policies in India?
Whole Life Plans
Money Back Plans
Annuity Pension Plans
Q- Who are the insurers of Life Insurance?
LIC Life Insurance
PNB MetLife Insurance
Kotak Life Insurance
Reliance Life Insurance
Max Life Insurance
SBI Life Insurance
Shriram Life Insurance
Bharti AXA Life Insurance Birla Sun Life Insurance
Aegon Life Insurance
HDFC Life Insurance
Aviva Life Insurance
Tata Aia Life Insurance
Q- Is it possible to change the duration of life with Term Insurance?
A. Once the policy is active, it is impossible to change the duration.
Q- Is it better to have term life insurance or whole life insurance?
A. If you want life coverage for the entirety of your life- prefer whole life insurance.
If you want just financial cover for your family and want to pay lesser premium, then the term plan would be a good option for you.