Endowment Insurance V/S Whole Life Insurance
Updated On Aug 25, 2021
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Whole life insurance plan is a type of term insurance policy that covers the policyholder for the rest of his or her life, up to the age of 100, as long as the policyholder pays the premiums on time. It provides a guaranteed death benefit to the policyholder's beneficiary in the event of the policyholder's untimely death during the policy's term. At the time of policy purchase, the insurance holder can choose the amount of the sum assured.
Whereas, an endowment policy is essentially a life insurance policy that, in addition to protecting the assured’s life, assists the policyholder in saving regularly over a certain length of time so that, if he or she survives the policy term, he or she can receive a lump sum payment at the policy's maturity.
Benefits Of An Endowment Plan
Following are the key reasons why everyone should purchase an Endowment plan:
Benefits For Death And Survival
You will get a sum assured and bonuses if the policyholder dies before the policy matures, as well as if the policyholder outlives the policy.
An endowment policy allows you to save more for the future while also providing for your family in the event of your untimely death. An endowment policy's payout, whether it's a death benefit or a survivor benefit, can be significantly bigger than a standard life policy's.
Premium Payment Frequency
Depending on the insurance you choose, you can make regular, limited, or single premium payments. You can also make payments on a monthly, quarterly, half-yearly, or yearly basis.
You can extend your life insurance coverage by adding riders to your policy, such as accidental death and total disability or critical illness. Some policies additionally include a premium payment waiver if you are diagnosed with a severe illness or become permanently disabled.
Both premium payments (under Section 80C) and final death or maturity payouts (under Section 10(10D)) are tax deductible.
Benefits Of A Whole Life Insurance
Following are the key reasons why everyone should purchase Whole life insurance:
Protection To Last A Lifetime
Your coverage on a term life policy terminates when it expires. You then have the option of allowing the insurance to lapse or obtaining new coverage depending on your current age and health status.
Whole life insurance is unique in that it is considered perpetual coverage. It's designed to give you comprehensive protection for the rest of your life, with premiums that won't go up, won't expire after a set number of years, and can't be canceled due to health or illness.
One of the main advantages of holding a whole life insurance policy is that it has a cash value component that can build over time. With whole life insurance, you can borrow against a portion of the cash value in your policy (up to a certain maximum) for any reason. It's vital to keep in mind that if you die suddenly, any outstanding loan balance on your whole life policy could be deducted from your death benefit. While you're alive, any outstanding loan balances on your policy accumulate interest.
Another advantage of whole life insurance is that it allows you to be more flexible. You can use this cash for a variety of purposes because it has the ability to accumulate financial value over time. You might alternatively simply leave it alone, with the option of increasing the cash value of your insurance over time.
While both have their own significant features, Endowment insurance, like term life insurance, focuses on the policy's term duration, which is typically 10 to 20 years. The policy's face value often called the "Death benefit" is paid in a lump sum to any beneficiaries if the assured dies before the endowment matures.
Whereas, when most people think of “Life insurance," they most often think of whole life insurance. A policyholder pays into the plan on a regular basis, usually monthly, and the money is split between two categories: insurance (particularly, the death benefit) and low-risk investments.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.