What is the difference between term and endowment insurance plans?

Last Updated: Feb 24, 2022 | 38,798 Views

Both are very different offerings - they are like chalk & cheese. Term insurance is a pure risk cover and a product which is an absolute must for every individual who has any dependent relying on their income. You typically should take a term insurance cover of 20 times your annual income. In term insurance, if you die, your nominee gets the sum assured. In case you survive the policy term, nothing is paid out to you. They are by far the cheapest form of cover.

Endowment Plans on the other hand are plans which are a combination of both insurance + investment. You get a life cover and you get an investment component also. You keep paying during the course of your policy term and at the end of the policy term you get a maturity amount. A variation of Endowment plans are Money Back plans where some part of the benefits are paid to you at regular intervals during the policy term itself.  Usually the insurance cover you get in these plans is not great or sufficient for the policyholder's dependents but they can be used as good investment tools. There is a sense of discipline and you keep paying regularly and build a corpus which can be used for some major cash requirement at the end of the policy term - say for your child's higher education or marriage or for buying a house.

Term Insurance Endowment Insurance
Term insurance plans only provide protection for the term specified in the policy document. Endowment insurance plans provide protection along with an investment opportunity.
They offer just the death benefits. They offer death as well as maturity benefits.
For the same sum assured, the premium charged by term insurance plans is much less than the endowment plans. The premiums payable for endowment plans are more expensive than term plans


Manoj Aswani
Manoj is the co-founder and COO of MyInsuranceClub. He has experience in Financial Services, Internet, Insurance and Outsourcing business. He has done his Post Graduation from XLRI, Jamshedpur.