Always compare and understand different types of insurance products before purchasing a plan and it is recommended to invest early to get maximum benefit.
To be prepared for any type of financial adversity is the need of the hour. There are many financial products available in the market to match your needs. Life insurance is one such product designed to provide financial protection for your family against any unforeseen event. With so many types of life insurance products, it sometimes gets very difficult to decide which is more suitable. The simple solution to this is the product that best fulfills your and your family’s financial needs. Let us discuss the endowment plan and term insurance plans and find out which is better for you.
What is a Term Insurance Plan?
Term insurance is an insurance product that provides financial protection for a fixed number of years known as the term of the policy. If the policyholder dies within the term of the policy, the beneficiary gets the death benefit as a lump sum amount.
What is an Endowment Plan?
An endowment plan provides both protection and growth of money through regular savings. It is an insurance cum investment product that not only provides life cover but also a maturity benefit which can help you in meeting various financial goals such as children's education and wedding.
Term Insurance Vs Endowment Policy:
Following are the major points of comparison between term insurance and an endowment plan:
Premium is higher for an endowment plan because it is a combination of insurance and investment both. On the other hand, term insurance plans offer pure risk cover without any investment and have lower premiums. Hence, endowment plans are costlier than term insurance.
Death Benefit and Maturity Benefit:
A term plan provides a death benefit to the beneficiary. In case a policyholder survives the term of the policy, there are no returns unless the policyholder has taken a return of the premium term plan. An endowment plan provides both a death benefit as well as a maturity benefit.
Sum assured in a term plan is purely used as a risk cover and is 15-20 times the annual income of the policyholder. In an endowment plan, a high sum assured means higher premiums. Sum assured as maturity benefit is not as high as compared to the sum assured of a term plan because it is divided into insurance cover and investment both.
A term plan is suitable for anyone who wants a pure risk cover. An endowment plan is suitable for someone who wants both a risk cover and wealth creation. If you are someone who has financial goals and also looking for insurance cover, an endowment plan is suitable for you.
Insurance Vs Investment:
Depending on your primary objective, you should choose a plan that best suits your financial needs. For insurance as your primary objective, buy term insurance plan as it has a much higher sum assured at a very low premium. But if the investment is your primary objective you can opt for an endowment plan as it can help you fulfil your financial goals in the long term.
Whether you choose an endowment plan or a term insurance plan, it should fulfil your requirements. It should be able to provide sufficient financial cover for your family in your absence. If the investment is your objective, make sure that the returns you will get should give you value for the money invested. If you have a steady income and are risk-averse, an endowment plan is best suited for you. Always compare and understand different types of insurance products before purchasing a plan and it is recommended to invest early to get maximum benefit.