Simplifying Life Insurance in India
Difference between Term Plan and Endowment Policy
Term insurance provides financial coverage for a fixed span of years. As per this policy, if the policyholder passes away, their nominee will get the insured amount. On the other hand, when it comes to an endowment policy, it acts both as life insurance and investment.
Having an endowment policy means wealth building while ensuring the protection of your family in case of your unfortunate demise. Therefore, while the goal of both policies is insurance cover, they differ in various aspects. Read on to know more about endowment plan vs. term plan.
What Is Term Insurance?
Among various life insurance plans, a term insurance policy is highly popular. It offers life coverage to an insured person for a period as per the ‘term’ chosen by policyholder. The sum assured will be predetermined by the policyholder while opting for a term insurance.
If the insured person passes away during the period of an insurance plan, the entire insurance money will be compensated to the nominee. However, term insurance plans provide coverage only in the event of the demise of the insured person. That means if the policyholder survives till the term of the insurance policy, there will be no insurance payout.
What Is an Endowment Policy?
Another well-known insurance policy available in India is the Endowment Plan. It differs significantly from a term plan. If the policyholder passes away, the insurance company will compensate the assured sum to their nominee. In addition, having this insurance plan will help you save on a regular basis and enable you to get a substantial amount on the maturity of the policy.
In other words, if you survive the term of the endowment policy, you will get the sum assured as a guaranteed maturity benefit. This means the insurance money will be given back to you in either situation. There are various endowment plans available to fulfil your needs and build a financial barrier to protect yourself for the future.
What Are the Differences Between Term Insurance and Endowment Policy?
Here are 5 key points of difference between the two:
|
Parameter |
Term Insurance |
Endowment Policy |
|
Coverage |
As per a term life insurance plan, the insurance company pays a particular sum to the policyholder if they die during the term of the plan. |
An endowment plan provides both life coverage and savings options. Here the nominee will get the sum assured if the policyholder dies. |
|
Price |
Term insurance only offers risk coverage, and no returns are involved in it. Thus it is comparatively cheaper than an endowment plan. |
An endowment plan offers maturity benefits and loyalty additions. Together, these features make this policy more expensive than term insurance. |
|
Sum Assured |
Since term insurance only offers risk coverage, its sum assured is relatively higher than an endowment plan. |
In case of an endowment plan, you will get a comparatively lesser sum assured since this plan fulfils the necessity for saving and death coverage. |
|
Purpose of Cover |
The objective of term life insurance is to provide financial support to the nominees in case of the policyholder’s unfortunate demise. |
The purpose of an endowment plan is to assist you to meet your future goals. |
|
Pay-out Options |
When it comes to term insurance, there are various pay-out options. For example, the person nominated can get the entire sum assured at a time. |
In case of an endowment plan, the pay-out is offered as a lump sum on the demise of the policyholder in continuation of the term.. |
FAQs About Difference between Term Plan and Endowment Policy
Can NRIs purchase term insurance in India?
Do term insurance plans provide coverage for the “Act of God”?
What is the maximum and minimum age to apply for endowment plans?
What is the age limit to obtain a term insurance policy?
Other Important Term Insurance Guides
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
