Term Insurance vs. Endowments- A Basic Guide

 Once you are choosing life insurance coverage, you may often be blocked with some questions regarding the term insurance plan as well as an endowment plan. There are a few differences between term insurance plans and endowment plans and these are discussed below: 

• In terms of investment, the term insurance plan only covers life or secures a life from financial losses. However, in case of an endowment plan, it is a combination of investment as well as insurance. This means that it covers life as well as maturity benefits. Once you are choosing a term plan, it is to be remembered that it must be calculated in the term insurance premium calculator so that you can work out your premium amount. The term plan pays out the lump sum coverage amount to the nominee in case of the policyholder’s death. However, if the tenure ends with the policyholder still alive, then there are no such payouts. 

• In the case of a term insurance plan, the premium amount is mostly affordable, but it provides the maximum coverage. The premium amount is easily calculated in the term insurance premium calculator where you need to put the personal data like name, age, address, occupation, annual income,  and other medical and personal information. In the calculator, you need to select the period that needs to be covered. As per your age and the annual income you will be able to know the premium amount that needs to be paid annually through the term insurance premium calculator. In case of an endowment plan which provides a maturity benefit as well as life coverage, the premium may sometimes be higher than a term plan. This is because participating endowment schemes offer reversionary bonuses in case of maturity.  

• In case of the sum assured, different insurance plans provide different sum assured amounts. In case of a term plan, it is not mandated to go for a higher premium in case of a higher sum assured. In the term plan, you may choose a higher coverage as per your income. But as compared to  term plans, endowment plans cover a higher sum assured with a higher premium amount due to the benefits of maturity as well as risk.

• In the case of policy objectives, there is an important difference between the term insurance plan and endowment plan. A term plan only offers the death benefits to the policyholder’s family. There is an objective to provide security to the family from financial crises such as regular expenses on a monthly basis, loans etc. in the absence of the person who is the policyholder. On the other hand, the endowment plan provides the death benefit as well as a maturity benefit of the plan. Wealth creation is possible in this type of plan, with the proceeds going out to policyholders irrespective of death. 

•  In case of rider benefits, both the term insurance plan and the endowment plan come with options for the same. In the case of a term insurance plan, you may choose the rider for the premium return if the option is available. In the endowment plan, you will get a maturity benefit as well as a bonus if you have chosen the rider option. The rider option is not mandated but in case you have taken a rider option in the endowment plan, you can pick from options like critical illness, accidental death etc.

• In case of payout choices, there is also a difference between the term insurance plan and the endowment plan. In the term plan, the nominee will receive the payout either as a lump sum or in installments. But in case of endowment insurance plans, the lump sum amount is either paid out upon the death of the policyholder or the completion of the maturity period.