When it comes to choosing the right life insurance policy, most people get confused between Term Insurance and Endowment Plans. Both provide financial protection, but they work very differently. Understanding these differences can help you select the plan that truly matches your financial goals, family needs, and long-term expectations.
In this article, you will learn:
✔ What is Term Insurance?
✔ What is an Endowment Plan?
✔ Key differences between both
✔ Which one is better based on your goals
✔ Comparison table
✔ Common FAQs
What is Term Insurance?
Term Insurance is a pure life protection plan. It provides a large sum assured (coverage amount) at a very low premium. If the policyholder dies during the policy term, the family receives the full sum assured. However, if the policyholder survives the term, there is no maturity benefit.
Key Features of Term Insurance
- ✔ High coverage at low premium
- ✔ Pure protection – only death benefit
- ✔ No savings or investment component
- ✔ Ideal for family financial protection
- ✔ Offers riders like accidental death, critical illness, waiver of premium
- ✔ Best for people who want maximum coverage within a budget
Example
If you buy a term plan of ₹1 crore at ₹600–900/month, your family gets ₹1 crore if an unfortunate event happens during the policy term.
What is an Endowment Plan?
An Endowment Plan is a combination of insurance + savings. It offers life cover along with maturity benefits. If the policyholder survives the term, they get a lump sum amount that includes bonuses and guaranteed benefits.
Key Features of Endowment Plans
- ✔ Provides both death and maturity benefits
- ✔ Works like a long-term savings plan
- ✔ Premiums are higher than term plans
- ✔ Returns are moderate
- ✔ Encourages disciplined savings
- ✔ Good for long-term financial goals and wealth accumulation
Example
If you buy an endowment plan of ₹10 lakh sum assured, your premiums may be ₹4,000–6,000 per month. At maturity, you receive the sum assured + bonuses.
Term Insurance vs Endowment Plans: Key Differences
1. Purpose
- Term Insurance: Financial protection only
- Endowment Plan: Insurance + savings
2. Premium Cost
- Term Plan: Very low
- Endowment Plan: High premiums
3. Returns
- Term Plan: No returns or maturity value
- Endowment Plan: Moderate returns + bonuses
4. Risk
- Term Plan: No investment risk
- Endowment Plan: Low-to-moderate risk based on bonuses and insurer performance
5. Coverage Amount
- Term Plan: High (up to ₹1–5 crore)
- Endowment Plan: Lower, usually ₹5–25 lakh
6. Best For
- Term Plan: People seeking financial protection for their families
- Endowment Plan: People looking for savings + insurance
Term Insurance vs Endowment Plan – Comparison Table
| Feature | Term Insurance | Endowment Plan |
|---|---|---|
| Type | Pure life cover | Life cover + savings |
| Premium Amount | Very low | High |
| Maturity Benefit | ❌ No | ✔ Yes |
| Coverage Amount | High (₹50 lakh to ₹5 crore) | Moderate (₹2 lakh to ₹25 lakh) |
| Returns | None | Guaranteed + bonus returns |
| Ideal For | Family protection | Long-term savings |
| Investment Component | No | Yes |
| Risk Level | Zero | Low |
| Tax Benefits | 80C + 10(10D) | 80C + 10(10D) |
| Affordability | Very affordable | Costly |
Which One Is Better?
Choosing between Term Insurance and Endowment Plans depends on your financial goals.
✔ Choose Term Insurance if:
- You want high coverage at a low cost
- Your main goal is family protection
- You are the only earning member of your family
- You want value for money insurance
- You already invest separately (mutual funds, FD, SIP, etc.)
Best for 90% people who want protection.
✔ Choose Endowment Plan if:
- You want both savings and insurance
- You prefer low-risk, guaranteed returns
- You want a disciplined investment system
- You prefer receiving a lump sum at maturity
Best Recommendation
Financial experts worldwide suggest:
👉 Buy Term Insurance for protection
👉 Invest separately (SIP, mutual funds, FD, PPF) for wealth creation
This combination gives the best results and flexibility.
Conclusion
Both Term Insurance and Endowment Plans are useful, but they serve different purposes.
If your priority is to secure your family’s future at minimum cost, then Term Insurance is the best choice.
If you want a low-risk savings plan along with insurance, then an Endowment Plan is suitable.
Choose based on your goals, budget, and long-term financial planning.
Frequently Asked Questions:-
1. Which is better — Term Insurance or Endowment Plan?
Term Insurance is better for protection, while Endowment Plans are better for savings. Most people prefer Term Plans because they are affordable and offer high coverage.
2. Why are term insurance premiums so low?
Because they provide only risk coverage and do not offer maturity benefits.
3. Can I buy both term insurance and an endowment plan?
Yes, many people buy a term plan for protection and an endowment plan for savings.
4. Do endowment plans give good returns?
They give safe and moderate returns. But returns are usually lower compared to mutual funds or PPF.
5. Does term insurance give money back?
No, unless you buy a return of premium term plan, which is costlier.
6. Are both plans eligible for tax benefits?
Yes, premiums qualify for Section 80C, and payouts are tax-free under Section 10(10D) (subject to conditions).
7. Which is good for beginners?
Term Insurance is the best and simplest option for first-time buyers.