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Should I Buy An Endowment Plan Or Term Plan Or Mutual Funds?

Updated On Aug 16, 2021

Endowment programmes combine savings and insurance benefits into a single handy bundle. Aside from death payouts and maturity benefits, some plans also give extra advantages. Life insurance takes centre stage in a Term Plan. In order to suit your demands, it provides comprehensive and fair coverage for a set period of time. Insurance policies with a set term require you to pay premiums each year.

There are certain variations between the two programmes, despite the fact that they both work incredibly well and may be purchased based on the investor's needs and financial goals.

Why Should You Choose Endowment Plans Over Term Plans?

There are a number of reasons Indians have favoured endowments over term policies, however, this tendency is slowly changing. A few things should be noted. It was either your neighbour or a nice chartered accountant who doubled as an insurance agent that was your average LIC insurance agent. A little over a decade ago, the equities craze hadn't yet taken hold in India, and mutual funds were only getting started. Endowments were the only types of insurance that these brokers would sell to consumers as a result. Secondly, with few investment possibilities accessible on the market, most investors are forced to take a conservative approach to invest.

Why Should You Choose Term Plans Over Endowment Plans?

It's important to understand why term plans outperform endowment policies as a risk management product, despite the fact that the trend is toward term policies, especially among the younger generation. First and foremost, financial planning dictates that investments and insurance be kept separate. No other purpose for insurance should be considered. If you look at it any other way, a term policy will be helpful to you in the long run. For a cheaper price, you may obtain a significantly higher level of protection with term insurance because it is a pure risk cover. Drittens, in the past, Indians underinsured themselves. People are starting to realise that their insurance coverage should be at least 7-10 times their yearly income in order for their family to not be concerned in the event of their death. The only way to obtain such a level of risk protection is through term insurance coverage. As a result, the cost of endowments will be exorbitant.

1. Benefits of Liquidity

An endowment plan's insured amount can be partially withdrawn in an emergency.

There is no liquidity in term insurance plans.

2. The Benefits of Maturity

Assured returns on endowment plans are guaranteed even if the policyholder lives over the policy term.

Such a provision does not exist in the case of term plans.

Pensions and Death Benefits

In the case of the policyholder's death, endowment plans pay out the guaranteed money, plus any earned bonuses, to the policyholder's designated beneficiaries. When the death benefit is paid, the policy is no longer in effect and is no longer in effect.

It would be the Sum Assured less any outstanding premiums payable in the year of death that would be paid out (if any). As a result of the high death benefit provided by term insurance, your family's financial needs are said to be more than met.


Both endowment and term plans cater to different types of investors and provide excellent protection to the policyholder. They both have their advantages. It will be simpler to understand the differences between the two designs, though, if you consider the issues mentioned above.

Must Read: 

How To Compare Endowment Plans The Right Way?

Who Should Buy An Endowment Policy?

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.

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