What Makes Endowment Preferable To Term Insurance?
Published On Feb 13, 2022 10:00 AM By InsuranceDekho
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Term insurance is for a specific period of time and has the lowest premium of any insurance plan. You can choose a term length of up to 35 years for your insurance coverage. Payments are fixed and will not change during your term. In the case of your untimely death, your dependents will receive the benefit amount indicated in your term life insurance policy. To make term life insurance more personal, riders like as a child, premium waiver, and accidental death can be added. An endowment policy is a combination of insurance and investment that looks like this: A certain percentage of the policyholder's life is guaranteed. The amount of life insurance coverage is referred to as the sum assured.
Another popular life insurance policy in India is the endowment plan. It is comparable to a unit-linked insurance plan in that it provides both insurance and investment benefits. However, there are some characteristics of an endowment plan that distinguish it from a term plan. When you buy an endowment plan, you can set aside money on a regular basis for a set amount of time. When the insurance matures at the conclusion of the period, you can get a lump-sum payment. It is only payable if the insured lives to the end of the policy term. The insurance coverage kicks in if the policyholder dies during the policy period. In this case, the nominee will receive the sum insured plus any relevant bonus as a death benefit. Endowment plans come in a variety of shapes and sizes to meet a variety of financial demands.
Is Endowment Insurance a Better Option Than Term Insurance?
Here are some examples of endowment and term insurance comparisons:
Term insurance protects against risk without requiring new investments. As a result, term insurance premiums are low, and the assured must pay them at regular intervals. On the other hand, the maturity benefits of an endowment plan tend to raise premium prices. It also comes with an add-on that hikes prices even more. Term insurance plans are less expensive than endowment policies.
2. Amount Assured
If an assured event occurs or the term plan ends, the sum assured is a predetermined amount that the assurer guarantees to pay to the policyholder or his or her nominee. The sum assured amount can be determined at the time of purchase of term insurance products. The sum assured on the term insurance plan is higher than the total assured on the endowment plan. This means that in order to acquire a bigger sum insured, a policyholder must pay a high premium in an endowment plan.
3. Maturity Benefits And Death Benefits
The policyholder receives the agreed-upon sum assured amount plus an additional bonus if the life assured survives until the endowment plan's expiration date. Term plans offer maturity benefits, but beneficiaries only receive death benefits. On the other hand, endowment plans offer both a death and a maturity benefit.
4. What Happens If The Policyholder Passes Away?
Death benefits are paid out to the beneficiaries in the case of the policyholder's untimely death. Term insurance provides a higher guaranteed payment, and the money received assists the family in meeting their financial obligations. Death benefits are also provided through endowment plans, although the sum assured amount may not be enough to cover all financial responsibilities.
5. Insurance vs. Investment
One of the most important distinctions between a term and an endowment plan is the nature of the plan. Endowment plans combine insurance with investing to help you to save for your long-term goals. A term plan is a combination of insurance and investment that allows you to save for your future objectives. A term plan is a pure life protection plan with no such add-ons coverage, whereas term plans are a combination of insurance and investment that allows you to save for your future goals. Term insurance, on the other hand, does not provide any prospects for long-term savings. If you get a term insurance policy, for example, the death benefits will go to your beneficiaries if you die. In an endowment plan, you can get the entire corpus you paid overtime at the end of the policy.
When it comes to your family, financial security is a top priority. A term insurance plan offers you a sufficient level of money to aid his or her family in the long run as the family's sole earner. Endowment policies are more expensive and difficult to afford than term insurance plans. Your financial needs and long-term goals will determine which insurance plan is ideal for you. For a brighter future, choose your strategy intelligently.
Also Read: Understand How An Endowment Policy Can Help You Save Money On Taxes.
A Detailed Comparison Of ULIP WIth Endowment Plans
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.