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Should I Go For A Term Plan Or Buy An Endowment Policy?

Published On Dec 24, 2021 10:00 AM By InsuranceDekho

Term insurance and endowment plans are completely antithetical in respect of monetary terms. All coverage consumers confront a difficult decision when deciding if to acquire a term or an endowment policy. A term plan is a no-risk insurance program that can last for a specific period of time. An endowment plan, on either hand, is a type of insurance coverage that is intended to pay a certain sum when the plan matures or the life assured dies. Both term insurance and endowment plans, for the uninformed, are fantastic tax-saving strategies that give preparation of a variety of coverage to the guaranteed. Term insurance and endowment policies are vitally valuable, although they have distinct qualities.

Should I Go For A Term Plan Or Buy An Endowment Policy?

Below are a few differences between the Term plan and the Endowment plan:

1. Insurance Vs Investment

Term plans provide you with a lot of insurance coverage for a low cost, but you don't get your money back. You get your mConcluoney back with yields as low as 4-6 percent under an endowment plan.

However, if you died, your family would receive a tiny sum from an endowment plan, which would not be enough to keep them afloat. In fact, if you have a home loan, it would be insufficient to cover the debt. If you pay Rs 10,000 for an endowment plan, you would get insurance coverage of around Rs 3 lakhs, depending on your age.

It's also worth noting that the younger you are, the lower your insurance cost will be. The premium rises as you become older.

2. Advantages And Disadvantages

Term plans providing a guaranteed return have lower premium rates than endowment plans. Only death benefits are available with a term plan. Following the assured's death, the assured's family receives a substantial sum. Death and maturity benefits are both available with endowment plans. If the policyholder lives longer than the length specified in the contract, the assured and his family will receive an assured amount known as a maturity benefit. The policyholder can take money from the endowment scheme's corpus up to a specific amount when cash is required. A term plan, on the other hand, provides more life coverage than endowment insurance. The amount earned at the end of an endowment plan's duration is heavily influenced by the market's current position. An endowment plan's death benefit may be useful in overcoming temporary financial difficulties, but it is not sustainable over time.

3. Tax Advantages Are Similar

Both of these investments qualify for the same tax benefits under Section 80C of the Internal Revenue Code. Income tax is not levied on interest income. However, as previously said, do not make these investments only for the purpose of receiving tax benefits. Invest in them since you will be covered by insurance and will be able to safeguard your family in the event of an emergency.

4. Death Benefit

One of the most significant contrasts between the two policies is this. Term plans provide death payments if an unpleasant event occurs while the insurance is still in effect. Both death and maturity benefits are available in traditional insurance contracts. When compared to regular insurance policies, however, the death benefits of a term insurance policy are substantially higher.


If you know that your dependents will be without the essential monthly income if you die, you should consider purchasing term insurance. People who have taken out loans (commercial, personal, or house loans) must also purchase a term insurance policy with a sufficient sum promised so that their nominees can pay off the outstanding debts without having to endure the financial burden. Those who want to see their money increase may consider endowment life insurance policies. Customers can still profit from the compounding effect of the investments made, even if the growth is not comparable to market-linked returns since endowment plans invest in conservative or risk-averse products. 

Do read - Best Endowment Policy You Can Buy In 2021

Do Endowment Policies Work In The Favor Of Life After Retirement?

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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