Endowment Plans Vs Term Plans - A Comparison

The key component that draws a division between the two plans is the purpose served by them. While term plans are well suited for securing the financial protection of the beneficiaries, Endowment plans function as an insurance cum investment plan, that help build a saving corpus for future use. On maturity of the policy, the policyholder receives the sum assured even if they survive the policy term. There is no provision of maturity benefits in term plans.

Comparison Between Term Plans And Endowment Plans

Following is a comparison between Term Plans and Endowment plans based on different criteria of insurance plans:

• Objective Of The Plan

Endowment plans are saving orientated plans that help weave a safety net over time. These plans add the benefits of savings to the basic concept of insurance plans. Endowment plans are aimed at investors who enter the insurance market with a desire to save for the future. Endowment plans prove to be a profitable option in the long run. Term Insurance plans, on the other hand,  provide security for a limited period. In case of the untimely demise of the policyholder, term plans release the sum assured to the nominee/ beneficiary as a death benefit. 

These plans do not provide an option for saving and hence are suitable for investors seeking life insurance for the well being of their family through death risks covered under term plans, unlike endowment plans.

• Affordability of Premium Rates

Endowment plans involve a higher premium rate as compared to term plans as they encompass a saving element in addition to the life insurance cover. These plans also offer additional bonuses and riders, causing the premium rates to be elevated.

Term plans are considered the cheapest life insurance plans and are suitable for investors looking for low premium rates. Since term plans only offer insurance cover, this feature highlights them as a more affordable option. 

• Additional facilities

Endowment plans provide a great package to unpack. It comes bearing several benefits like loan facility, Maturity benefit, the death benefit. Endowment plans allow the policyholder to pursue a loan against the policy. So, if the need arises, the collateral function of an endowment plan will activate making the loan process effortless. Another crucial feature of an endowment plan is the maturity benefit, which requires the sum assured to be paid to the policyholder even if they outlive the maturity period.

Term plan, on the other hand, is a straightforward life insurance plan, covering the death risks relating to the life insured. It offers the benefit of high life cover at economical prices. Term plans function extremely well as life insurance and are suitable for you if your goal is to financially protect your family in case of adversity.

Conclusion

As it is clear from the above article, both plans are designed for the different needs of the investors. While endowment plans offer a  dual objective, it is no reason to overlook a term life plan. Both plans function well on the scheme set for them. In the end, it comes down to the motive of the investor to decide between the two plans.

Also Read: 

Difference Between ULIPs And Endowment Plans

Why Buying Endowment Plans Online Is A Good Option?

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.