Life Insurance vs Endowment Insurance - Which One Should You Buy?

Difference Between Life Insurance & Endowment Insurance
Which One You Should Buy?

Life insurance and endowment insurance may seem one and the same to you at first glance. After all, both are quite similar in their structure. Life insurance and endowment insurance accumulate cash value. Also, they provide a non-guaranteed bonus, which comes from the premium being invested in the fund of the insurance company. When the end of the policy term approaches, the payout is the sum assured along with any accumulated bonuses or cash dividends. In other words, it can be said that both endowment and life insurance policies are subject to early surrender fees and require one to hold on to the policy until maturity to avoid loss of money.

Life and endowment insurance is also same in the sense that their premium structure is also similar. For both, premiums are paid monthly or annually up till the time policy matures. When it comes to coverage, similarity is quite clear.

So, what makes them different?

Difference Between Life Insurance & Endowment Insurance

Let us take a quick look at the differences:

The basic difference is that life insurance serves a different end goal and endowment insurance serves the other. Whole life insurance covers you primarily for death, terminal illness or disability while endowment is more of a savings plan that comes with an insurance cover attached.
The policy terms for both are different as well. It must be noted that endowment plans typically have a shorter term period as compared to life. Endowment plans come with maturity periods up to 25 years, while term life insurance plans are matured after 20-25 years or up until the life assured turns a certain age.
The payout is also different. Endowment policies provide the policyholder with a payout when the policy matures. On the contrary, life insurance policies provide payout to the beneficiaries. In case, one has a term life policy, they won't get a payout if they survive after the policy matures.
When it comes to endowment policy, the premium is split between the savings portion and insurance portion. On the other hand, life insurance policies guarantee sum assured so the beneficiaries get the sum assured amount when the policyholder dies.

Which One You Should Buy?

Now that you understand the basic similarity and difference between life and endowment insurance, it is time to find out which one is good for you.

The first thing you should know is that the choice of the plan depends on what you are looking for. If you are looking for a low-risk savings plan, it would be best to consider endowment policies. If you are looking for ways to safeguard your dependents financially even if you are not there, investing in a life insurance policy would be the better choice to make.

Remember, while an endowment policy will help you save money for a particular goal, a life insurance policy will provide you with financial protection against disablement or death so that you and your family are not left with debts and have sufficient funds to live a peaceful life.

That said, make sure you find out what you want in the first place and then proceed with the final decision.