Term Insurance And Endowment Plan: 5 Major Differences
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It is essential to buy an insurance plan so that your future is sustainable with respect to your financial assets. They help you save up your current earnings so that they can provide for your future milestones. Moreover, insurance plans also promise financial assistance to your loved ones when you are not there. Term insurance plans and endowment plans are two of the most popular types of insurance plans.
What are Term Insurance Plans?
Term insurance plans are a type of insurance plans wherein the policyholder receives protective cover for a certain period of time or "term". There are no maturity benefits in this type of plan but death benefits are paid out in case the policyholder passes away before the end of the term. You can also add riders to the basic term insurance plan to enhance its cover.
What are Endowment Plans?
Endowment plans are a great way to invest in the financial aspects of your future. This type of insurance plans payout death and maturity benefits in a lump sum. There is no regular instalment payout option but there is an additional maturity benefit that depends on the company profits and the premium regularity.
Term Insurance vs. Endowment Plan: 5 Major Differences
Although term insurance plans and endowment policies are both insurance plans, they have differences between them. Take a look at the 5 major ones.
|
Parameters |
Endowment Plans |
Term Insurance Plans |
|
Primary Facilities |
Provides protective cover and also, saving component to grow wealth |
Pure insurance plan with protective benefits such as life cover and riders |
|
Benefits Paid Out |
Death benefit to the nominee as well as maturity benefit to the policyholder |
No maturity benefits available but death benefits and rider benefits (if applicable) |
|
Cost |
Relatively more expensive |
Less expensive |
|
Payout Methods |
Lump-sum payouts for maturity as well as death benefits and no option for instalment payouts |
Benefits can be paid out in lump sum, regular instalments or even a combination of both |
|
Sum Assured |
Relatively lower as they have a maturity benefit and savings component which is a primary focus |
Relatively higher returns |
Conclusion
Both term insurance plans and endowment plans are unique and beneficial in their own rights. Their differences make them more catered to certain choices. You must choose the right one for yourself by carefully examining the features of the insurance plans and your own needs and goals.
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