Should you go for an endowment life cover or for a term plan?
“The simplest purpose of our lives is to be happy.”- Dalai Lama
You may have your distinguished way to find solace and happiness. But for a few individuals, who live with their family feel content when they build financial security for them. It brings confidence and peace to their mind after they are able to protect the future goals of their loved ones.
In today’s time, you can offer comfort and shield to the dependents if you have enough savings. Keeping aside money will not help you build a substantial fund for the entire family. Then what?
Don’t worry it is not as complex as it looks.
You can relax and sit back to see your money growing with the life insurance policies. Mere saving money only helps you accumulate funds but with the life insurance policies you can have life protection cover also. The policies help you to take care of your families in case any unfortunate event takes place and you are not there to take care of them. Now after reading this, does owning a policy look appealing to you?
If yes, then let us explore the options you can have.
If getting a lump sum benefit is your motive, then you must buy an endowment plan or a term plan. Let us read about the two types of policies one by one.
What is an endowment plan?
Endowment plan is a life insurance policy that comes with a dual benefit. The policy provides life protection as well as an opportunity to save money in life. Over the period, you create huge funds to fulfil the long-term or short-term goals in life.
On the death of the life insured, the policy pays the lump sum benefit to the nominee. The lump-sum amount consists of sum assured as well as bonus that the insurer declares. But in case, the life insured survives the policy term, she/he will get the maturity benefit at the end.
There are a different type of endowment plan you can consider.
Types of Endowment Policies
These are the different types of endowment policies that you can think of:
- Unit-Linked Endowment Plan: This is a fixed-term savings plan that also comes with life insurance. The premium paid by the insured is divided into distinct units held in a specific investment fund chosen by the insured individual under this plan choice. The fund’s return on investment is totally dependent on its market performance.
- Full Endowment Plan: This type of the savings plan is the one that gives a return with profits. The insured person receives the basic sum assured, which is equal to the death benefit. From the beginning of the policy, this amount is guaranteed. Furthermore, the ultimate payoff to the insured is bigger because it comprises the total sum assured plus an additional bonus (if any).
- Low-Cost Endowment Plan: The low-cost endowment plans are the ones that are designed to enable the life insured to accumulate funds. These low-cost plans are used for the repayment of some mortgage or loans. If the life insured passes away during the policy period, the beneficiary will get the target sum assured only.
- Non-Profit Endowment Plan: Under this type of endowment plan, a sum assured is paid to the policyholder as the maturity benefit. If the life insured passes away during the policy term, the sum assured is given as death benefit to the beneficiary.
Next, let us read about the term plan.
What is a term plan?
A term plan is a life insurance policy that pays in lump sum after the death of the life insured. It is a high life cover that is available at an affordable premium. The nominee receives the death benefit after the death of the life insured. There is no survival benefit under the policy but the low cost premium makes it an affordable life cover.
For example, you can get a high cover of Rs.1 crore at just Rs.27/ day when you are 25 years of age. Young individuals get a premium on low prices because the probability of risk in such proposals is less. If you want to buy a term insurance plan, you can buy ABSLI DigiShield Plan term life insurance online to save cost and money.
You can have both the life insurance policies, but if you have to decide one you can further read the difference between the two.
Difference between the endowment plan and the term plan.
These are the differences between the endowment plan and the term plan:
|Particulars||Term Plan||Endowment Plan|
|Scope of Coverage||Term insurance is a life insurance policy that provides life cover to the insured.||The endowment plan provides life cover as well as scope of investment under the same insurance policy.|
|Purpose||Term plan is suitable to support the family and dependents in case the life insured passes away during the policy term. The policy helps the family in case of the absence of the life insured.||On the other hand, an endowment plan is a life insurance policy that offers opportunity for wealth creation and gives insurance coverage.|
|Affordability||Term insurance is a popular life insurance policy that is known for its affordability.||But endowment plans are comparatively available for a higher premium than the term plan as it has the component of investment as well as insurance.|
|Savings||Term insurance is just to build financial security. There is no return that the nominee or the life insured gets hence there is no savings.||Endowment plan on the other hand gives you enough scope of savings under the policy. You pay the premium over the years that help build a huge fund.|
|Sum Assured.||Under the term plan, you can select a higher sum assured. The amount can be according to your premium paying capacity and anywhere between Rs.10 lakhs to Rs.1 crore.||With the endowment plan, if you look for higher savings with a higher sum assured, you will have to pay a higher premium.|
|Maturity Benefits||In common there are no maturity benefits payable under the term plan. But if the life insured opts for the Return of Premium policy, all the premiums paid till date are returned after the completion of the policy period only if the life insured survives.||The endowment plan is designed to offer maturity benefits at the end of the policy term.|
|Withdrawals||There is no facility through which you can withdraw the funds under the term insurance policy.||You can make partial withdrawals of the sum assured under the endowment plan, if there is a financial emergency.|
Buying a life insurance policy is a matter of discretion where individuals consider their life goals to align with the policy payouts. Whether a term plan or an endowment plan, the idea behind the life insurance policy is to create financial security in life. Before buying a policy you must keep in mind your financial objective, current and future expenses, life goals, and premium paying capacity. For more information on the term plan or endowment plan, visit the links.
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