Term plan or endowment plan: which one you should choose?


In today’s time, insurance has become a necessity. Health insurance, life insurance, dental insurance, business insurance, etc. are various types of insurance.

If we talk about life insurance, term plan, endowment plan, universal plan, etc. various options are available. So, Often we get confused about which plan we should go with?

Term insurance plan and endowment plan:

Term insurance is a type of life insurance, which offers financial protection to your family. Where an endowment plan gives both protection and maturity benefits. The maturity period can be five, ten, fifteen years.

Main points of difference:

Term insurance only protects against uncertainties; whereas an endowment plan provides protection as well as helps in reserving savings.

In term insurance, no maturity benefit is there if the policyholder outlives the policy period, in the case of endowment plan maturity benefit is fixed.

Term insurance is less expensive as it only covers the risk. An endowment plan provides saving benefits along with protection so, it is comparatively more costly.

Term insurance does provide tax benefits only if the policy has covered health rider and if you have opted for it, endowment plan provides tax benefits in case of both maturity and final payouts under section 80c and 10D of Income-tax act.

Sum assured is highest in case of term insurance, in the case of endowment plan, it is low because of fixed maturity benefit.

Term insurance’s main aim is to provide support to nominees in case of dismissal of policyholder, endowment plan helps in reserving money for a particular purpose e.g. education, marriage, etc.

In term insurance, the nominee receives the sum assured in form of a lump sum or installments or a combination of both on the death of the insurer, In the case of an endowment plan, the payout is possible in the lump sum in two conditions: Either death of the policyholder or on maturity.

Loyalty additions are not provided in term insurance, while endowment plan provides them.

To go with term insurance or endowment plan that depends upon the individual. Risk appetite, return expectation, financial goals, regularity of income, etc. factors should be taken into consideration before choosing any life insurance plan.

If you have dependent family members and you are the only breadwinner in the family, then in that case term insurance might be a good option for you. If you want to save for the future for definite goals and you want guaranteed returns then, an endowment plan may work for you. Along with that, if you want to gain tax benefits on insurance then an endowment plan can be suitable for you.

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