Which Is Better- Term Insurance Or Endowment Plan?

Term insurance, as the name implies, is for a set length of time and has the lowest premium of any insurance plan. You can select a term duration of up to 35 years for which you want coverage. Payments are fixed and do not increase throughout the course of your term. Your dependents will get the benefit amount specified in the term life insurance policy if you die unexpectedly. Riders, such as children, premium waivers, and accidental death, can be added to term life insurance to make it more personalized.

A mix of insurance and investment, an endowment policy: The life of the policyholder is covered up to a specified sum. The sum assured refers to the life insurance coverage. This sum promised is covered by a portion of the premium. Another portion is set aside for the insurer's administrative costs. The remainder of the premium is put into the investment.

Key Comparisons Pointers Between Term Insurance And Endowment Plan

Following are the key comparison between the two plans:

1. Premium

Term life insurance is the most cost-effective form of life insurance available to the average person. You can get term insurance with a large sum assured for ostensibly low premiums. In India, rates for endowment plans are slightly higher than premiums for term protection plans.

Must Read: Endowment Insurance V/S Whole Life Insurance

2. Returns

An endowment plan combines investing with protection, whereas a term plan is an unfiltered death mitigation method that provides straightforward life cover. As a result, the latter allows you to set aside money for the future.

A term plan does not provide such savings. When you buy a term plan, the beneficiaries will only receive the assured death benefit if their loved one dies. When the period of an endowment policy expires, you will receive the entire corpus that you have saved for.

3. Safety And Security

A term insurance policy guarantees payment of the sum promised if the policyholder dies within the specified time range. There is no maturity advantage if they don't. An endowment plan, like a savings plan, provides day-to-day life insurance. In the event that the policyholder dies, the policyholder receives a death benefit. They earn a maturity benefit if they last longer than the specified term.

4. Tax Benefits

Taxes paid on the term protection plan can be claimed under Section 80C of the old Income Tax Code. The maturity and death benefits are also tax-free under Section 10(10D) of the Income Tax Act of 1961. In the case of a critical sickness benefit, an additional sum can be guaranteed for Section 80D allowances. The premium paid for the endowment policy qualifies for a deduction under Section 80C of the previous tax code.

6. Benefits Upon Maturity

A term protection plan offers no maturity benefits in the best-case scenario. Do you get the expenditures paid towards the promised sum if you choose a premium return policy? If the policyholder outlives the term in question, the insurer is liable for reimbursing the payments under this agreement. The total is then used to calculate their maturity benefit. Maturity benefits are available at the end of the policy period with an endowment plan.

Conclusion

The goal of the insurance policies is to keep your family protected when they need it the most. As a result, you should not rely on this as your sole source of investment or savings. However, the policyholder must benefit from both term and endowment insurance plans based on their financial goals.
Market experts feel that insurance should not be mingled with other types of investments, giving unfiltered solutions like term insurance plans an advantage over endowment plans.

Also Read: Endowment Plan - Features and Benefits

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.