What are the Major Differences Between an Endowment Plan and a Term Plan?

Many people are aware of the fact that under both endowment life insurance plans as well as  term life insurance plans, a life cover is offered.  However, both these plans cater to different needs of an individual. When one one one hand, an endowment plan fulfills the requirement of savings, on the other hand, a term insurance plan fulfills the need of security.  To be able to opt for a right insurance plan, you need to carefully study the differences  between them, their features and your requirements.

Endowment Plan V/S Term Plan

Given below are the major points of differences between the two plan types:

1. Coverage

An endowment plan provides life coverage along with savings options. The nominee would receive a death benefit in the event of unforeseen demise of the policyholder. In case you outlive the pln tenure then you would get a maturity benefit.

A term plan provides a pure life cover. This plan promises a sum assured in case the policyholder dies during the plan terenure. In case they outlive the pln tenure then they would not get a maturity benefit.

2. Sum Assured

The sum assured offered under an endowment plan is not as high as compared to what is provided under a term plan. This is due to the fact that an endowment plan meets the need for savings, you receive a lower sum assured but you also get a maturity benefit.

The sum assured provided under a term insurance plan is highest. This is due to the fact that it provides only for risk cover and in meeting your protection needs.

Also read - Some Salient Features Of Endowment Plans

3. Price

An endowment policy is comparatively expensive as it offers the policyholder with maturity benefits alongside loyalty additions.

As a term plan does not offer any return and only offers protection against risk, it is less expensive.

4. Payout Options

There is a lump sum payout under an endowment plan, which is received either on policyholder's death during the tenure of the plan or as maturity benefit on the completion of plan duration.

Under a term insurance plan, the nominee gets the sum assured in lump sum or in installments or in a combination upon the demise of the policyholder during the duration of the plan.

At the End

After studying the afore-mnetioned points, now you are aware of some major differences that stand between an endowment  and a term insurance plan. Both these plans have their own sets of benefits, however, the requirements that these two fulfil are different. Therefore, you need to carefully analyze your insurance needs and then select a plan that is ideal for you.

You may also like to read - Key Benefits of an Endowment Plan

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.