26th April 2025, Gaurav Kumar Singh
When it comes to life insurance, most people are confused between two popular options – Term Insurance and Endowment Plans. Both offer life cover, but their purpose, cost, and benefits are quite different. Choosing the right one depends on your financial goals and current life stage.
In this blog, I’ll break it down in simple terms, compare both options, and help you decide which one is better for YOU.
- What is a Term Insurance Plan?
Term Insurance is a pure protection plan. It provides life cover for a specific period (called the term) – like 10, 20, or 30 years. If the policyholder dies during the term, the nominee gets the sum assured. If the policyholder survives the term, nothing is paid.
Key Features:
• Low Premium, High Coverage
• No Maturity Benefit (unless you choose the return-of-premium variant)
• Ideal for young earners, parents, and those with dependents
• Provides financial security to your family in your absence
Example: Rahul buys a term plan for ₹1 crore at ₹10,000 per year for 30 years. If Rahul dies during this period, his family gets ₹1 crore. If he survives, nothing is paid.
- What is an Endowment Plan?
An Endowment Plan is a mix of insurance and savings. It gives life cover and also pays a lump sum at the end of the policy term if the person survives. It’s like a forced savings plan with low returns and some life cover.
Key Features:
• Moderate Coverage with Higher Premiums
• Maturity Benefit Paid if You Survive
• May include bonuses or guaranteed additions
• Ideal for conservative savers looking for a disciplined savings habit
Example: Priya buys an endowment plan with a sum assured of ₹10 lakh for a term of 20 years. She pays ₹50,000 per year. If she dies during the term, her family gets ₹10 lakh. If she survives, she gets ₹10 lakh plus bonuses (if any).
- Key Differences – Term Plan vs Endowment Plan
| Feature | Term Insurance | Endowment Plan |
| Purpose | Pure protection | Protection + Savings |
| Premium | Very Low | High |
| Payout on Death | Sum Assured | Sum Assured + Bonus (if any) |
| Payout on Srrvival | None | Sum Assured + Bonus |
| Returns | None | Low To Moderate |
| Tax Benefits | 80C & 10(10D) | 80C & 10(10D) |
| Ideal For | Income protection | Goal-based savings |
- Which is Better?
Choose Term Plan if:
• You want high life cover at a low cost.
• Your main goal is to protect your family’s future.
• You want to invest the savings elsewhere for higher returns.
• You’re the sole earner in the family or have financial dependents.
Choose Endowment Plan if:
• You want a guaranteed lump sum at the end of the policy.
• You’re okay with lower returns in exchange for safety.
• You are not good at investing on your own.
• You want a disciplined savings habit.
The Smart Way – Combine Both!
Checklist to Compare Term Insurance Plans in India
Here’s a practical tip: Buy a term plan for protection and invest the rest in PPF, mutual funds, or other investment options.
Why?
Because:
• You get better returns
• You get full life cover
• You stay flexible in your investments
This strategy is often recommended by financial planners.
Final Verdict
Term Insurance is best for pure protection at a low cost. If your goal is to secure your family’s future and invest smartly, go with a term plan and invest the rest separately.
Endowment Plans are for those who prefer guaranteed returns and are less comfortable with market risks. But keep in mind – returns are usually lower than inflation, so don’t expect wealth creation.
If you found this article valuable, please don’t forget to Like and Subscribe to my blog for more expert insights and updates.
THE MIND UPGRADE 