In terms of life insurance, most people are aware that both term insurance, as well as endowment plans, offer a life cover. However, they both cater to different needs. While term plans fulfill the need for protection, endowment plans fulfill the need for savings. You will be able to choose the right plan for yourself once you identify the differences, the features, and your needs pertaining to each category of life insurance. These factors can help you arrive at the best term insurance policy or make a comparative analysis of term insurance vs. an endowment plan.
The Difference Between Term Insurance and Endowment Plan
Here are the main points of difference between the two:
A term life insurance plan offers a pure life cover. It is a simple life insurance plan that promises to pay a sum assured if the policyholder dies within the policy period. If he outlives the term, there is no maturity benefit.
An endowment plan offers a life cover as well as a savings option. Your nominee gets the death benefit in case of your unfortunate demise. If you outlive the policy period, you get a maturity benefit.
Since a term plan doesn’t offer any return and only provides risk cover, it is less expensive.
On the other hand, an endowment plan provides a maturity benefit, along with loyalty additions. These additional features make an endowment policy more expensive.
The sum assured in a term insurance plan is the highest. This is because it provides only risk cover, fulfilling your need for protection.
The sum assured is not as high in an endowment plan as compared to a term insurance plan. This is because an endowment plan fulfills the need for saving. You get a lower sum assured, but you are also offered a maturity benefit. Do you know how much life cover you require?
Aim of cover: The two types of life insurance have two very different aims of cover.
Term life insurance aims at only providing financial help to your nominees in case of your demise. The amount can work as an income replacement to manage your household expenses and outstanding EMIs. It is essential to buy a term insurance plan if you have dependent family members.
The endowment plan aims to help you save for your future goals. It provides guaranteed returns and caters to the need of future savings. Learn more about endowment plans here.
In a term insurance, the nominee receives the sum assured in lump sum or equal installments or a combination of both on the death of the insured during the policy period The policyholder has the option to customize the payout option based on his/her family needs it can be lumpsum, monthly or a combination of both.
In an endowment plan, the payout is lump sum either on the death of the policyholder during the policy term or as a maturity benefit on completion of the policy term.
In Conclusion: How Knowing the Difference Between Term Insurance and Endowment Plan helps
So as you can see from the points mentioned above, there are some core differences between term insurance and endowment insurance. Both have some very good benefits, but the needs they fulfill are different. So you need to assess your insurance requirements and see which kind of life insurance is best suitable for you, because as it is said- ‘Sabse Pehle Life Insurance’, it stands to be a perfect financial cover for your loved ones.