When you think of life insurance, you’ll often hear two popular terms — Term Plan and Endowment Plan. Both offer life cover, but beyond that, they work very differently.
The confusion is common — many people in India still buy endowment plans thinking they’re getting “investment plus insurance,” while others swear by term plans as the only sensible choice. The truth? It depends on your financial goals, risk appetite, and discipline with investing.
Quick Comparison Table
| Feature | Term Plan | Endowment Plan |
|---|---|---|
| Purpose | Pure protection for your family | Protection + savings/investment |
| Premium Cost | Low (high coverage for less money) | High (part of premium goes to savings) |
| Payout on Survival | None | Maturity benefit after policy term |
| Best For | Income replacement, large cover | Short/medium-term savings goals |
| Returns | No returns (only death benefit) | Low to moderate (4–6% typically) |
What Is a Term Plan?
A term plan is pure life cover. You pay a small premium to get a large sum assured for a fixed period. If you survive the term, you don’t get anything back.
- Example: For ₹1 crore cover, a healthy 30-year-old may pay just ₹8,000/year.
What Is an Endowment Plan?
An endowment plan is a mix of life cover and savings. A part of your premium goes towards insurance, and the rest is invested by the insurer. You get a lump sum (maturity value) if you survive the policy term.
- Example: For ₹10 lakh cover, the same 30-year-old may pay ₹50,000/year, but will get back around ₹12–14 lakh after 20 years.
When to Choose Which
- Choose Term Plan if: You want maximum coverage for minimal cost, and you’re disciplined enough to invest the difference elsewhere (like in mutual funds or PPF).
- Choose Endowment Plan if: You want a “forced savings” mechanism and guaranteed maturity value, even if returns are modest.
Case Example
Rohit, 35, chose a term plan for ₹1 crore and invested the ₹40,000/year he saved (compared to an endowment plan) in mutual funds. After 20 years, his term plan kept him protected, and his investments grew to over ₹20 lakh — far higher than an endowment maturity value.
Why It Matters
The biggest mistake is buying a plan without understanding the difference. Term plans are protection-first; endowment plans are savings-first. Knowing your financial priorities ensures you buy the right product.
Insurance should protect first, and invest later. Share this eBharat.com guide so more families choose plans that truly match their needs.
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