Difference Between Endowment Plans, Term Plans and ULIPs

Endowment Plans vs Term Plans vs ULIPs
Conclusion

Endowment plans, Term plans and ULIPs are the most popular insurance products in today's financial market. Before choosing the best policy for you, it is essential to know the main differences among the three. Read the article to know the distinguishing features among them.

Endowment Plans vs Term Plans vs ULIPs

The table given below shows differences among Endowment Plans, Term Plans and ULIPs based on particular significant criteria.

CRITERIA	ENDOWMENT PLANS	TERM PLANS	ULIPS(Unit Linked Insurance Plans)
Nature	Endowment plans are traditional life insurance policies that offer both life coverage and investment opportunity to the policyholder.	Term plans are the very basic insurance policy that provides pure life coverage to the policyholder for a specific period of time(Policy Tenure).It doesn't offer any maturity benefit as it is solely designed for the financial protection of the life assured.	The premium paid in ULIPs is divided into two portions. A smaller part of it is used to provide life coverage of the policyholder and the larger share is invested in the equities or debt fund by the insurer. They offer returns as per the performance of the market .
Lock-in period	The lock-in period of the policy depends on the type of plan chosen and its premium payment tenure. Usually it lies between 2 to 3 years.	Term Plans don't have any lock in period.	ULIPs have a compulsory 5- year lock in period.
Transparency	Zero Transparency as there is no individual investment portfolio. All the premiums are invested in a common with profit fund.	Zero Transparency	It is highly transparent as it allows you to keep a track of your investment portfolio.
Returns	They offer guaranteed returns. A lump sum amount is paid to the policyholder which includes the sum assured and bonus(if any). In case any unfortunate happens to the life assured, the lump sum is given to his/her nominees .	No assured returns unless the policyholder opts for TROP(Term Plan with Return of Premium).	Returns are dependent on the market conditions and the funds performed in the capital market. At the time of maturity, redefining of units is possible for the policyholder which are collected at then prevailing unit prices.
Premium Rate	Generally the premiums are high as the plan provides both life insurance and saving features.	The premium rate is generally low and least among the three as it is only used for life coverage of the assured.	The premium rate is highest amongst the three as it is utilized for life coverage and investment in the capital market.
Flexibility	It is moderately flexible. You can access Add-on riders.	It is not flexible as it only provides financial protection.	It is the most flexible of the three. You have the option to switch funds during the tenure after the lock in period.
Risk Exposure	Their exposure to risk cannot be altered by the policyholder.	Risk Exposure cannot be altered by the policyholder.	It is the riskiest among the three as the returns are dependent on the market performances of the invested funds.

Conclusion

Endowment plans, term plans and ULIPs have their own advantages and disadvantages .It is not an easy task to identify and opt for a life insurance product which gives you the maximum advantage based on your investment goals,financial circumstances and risk appetite. It is very essential to go through the policy terms and conditions before choosing one. It is ideal to take financial experts' advice for selecting the most suitable policy for you.