What Suits Me Best- Endowment or Term Plan?

Posted by amrina alshaikh on July 20th, 2019

Term Insurance and Endowment Insurance are two popular types of life insurances; but for those who are willing to buy a new policy and know nothing about both of these policies, the decision making goes critical. In addition to that, folks and colleagues urge you to buy the plan they have purchased. But the question arises, which insurance is better to buy? Here, we are going to make a comparative analysis of both the plans. 

Premium Rates

Term insurance premiums are considerably lower than the endowment policies. Hence, it is beneficial for those who are looking for life insurance policies but aren’t in the position to pay higher premiums. Since term insurance doesn’t offer any cash value benefit, the premiums are low. On the other hand, an endowment is a cash-value plan, thus charges higher premiums.

Benefits Offered by the Plans

When benefits are considered, term insurance offers only death benefits if the event occurs during the policy tenure. If the insured person survives the tenure, no maturity or survival benefits are paid to the policyholder in case of regular term insurance. Whereas, an endowment policy provides both maturity and death benefits to the policyholder. This stands to be added advantage if you are looking for a lump-sum at the end of the policy term. Term insurance plans also come with ‘Return of Premiums’ provision that charge slightly higher premiums than the regular term plans. At the end of term return of Premium plans, the premiums are paid back to the policyholder.

Flexibility

Endowment policy lets you save your hard-earned money and offer the right amount at the end of the policy. Not only that, but endowment plans offer the flexibility of partial withdrawal of the money during the policy tenure. But it is to be understood that once the money is withdrawn partially, the corpus offered at the end of the term will get reduced. Also, the corpus built at maturity of the endowment policy can be used to fulfil the financial goals, which cannot be done in case of Term insurance since there is no such benefit. Therefore, in terms of flexibility, endowment plans play a better role than term plans.

Life Cover

Finally, when it comes to the coverage amount, term insurance is seen to be offering considerably higher cover than endowment plans. The sum assured provided by term plans is fixed and definite, whereas, in the case of endowment plans, the sum assured is dependent on market performance.

In the end, if you are the only breadwinner in the family and have any dependant on you, it is advised to go with term insurance. However, if the end-amount is not much important, and the primary focus is on savings, endowment plan is anytime better. Analyse your requirements today and opt for a suitable plan!