Term Insurance Vs Endowment Plan: Which One Has More Benefits?

11-June-2021 |

An uncertain future and decreasing life expectancy have significantly impacted the rising demand for insurance policies. Not only do they help in planning your financial goals, but they also act as a safety net for your family members in the absence of a bread earner. It's only wise to invest in a life insurance policy to ensure long-term safety and security. And when it comes to choosing the perfect product for your family, there are two main options: term insurance and endowment plans.

Term insurance plans offer financial security for a period. In the event of the policyholder’s death, their family will be eligible for a death benefit equal to the sum insured at the beginning of the policy agreement. On the other hand, an endowment plan is a protection cum investment plan that offers a safety net for the family and an investment asset.

There’s more to the two types. Here’s a brief term insurance plan comparison:

         1. Premium

 

Term protection is the most financially viable life coverage tool accessible to the commoner. You can benefit from term protection with a high sum assured at ostensible premium charges. Endowment plans, in general, have marginally higher premiums as compared to term protection plans in India.

        2. Returns

 

While a term plan is an unfiltered death mitigation plan strategy that offers straightforward life cover, an endowment plan mixes investment and protection. As such, the latter permits you to put something aside for the future.


A term plan offers no such saving benefits. When you purchase a term plan, the recipients will get the assured death benefit only at the expense of their dear one dying. With an endowment policy, you will get the whole corpus that you have saved for in the long run when the term is over.

       3. Protection

 

A term insurance plan promises to pay the sum assured if the policyholder passes away within the mentioned time frame. If they don’t, there is no maturity advantage. An endowment plan offers a day-to-day life cover just as a savings scheme. The policyholder also gets a death advantage in the event of their passing. If they outlast the said period, they get a maturity benefit.

       4. Tax Benefits*

 

You can claim the taxes paid towards the term protection plan under Section 80C of the old Income Tax system. Likewise, the maturity and death advantage received are tax-exempted under Section 10(10D) of the Income Tax Act, 1961. In case of a critical illness benefit, an extra sum can be guaranteed for allowances under Section 80D. The premium charged for the endowment policy is eligible for claim under Section 80C of the old Income Tax system.

      5. Benefits Upon Maturity

 

In a best-case scenario, a term protection plan doesn't offer any maturity benefits. When you opt for a premium return policy, do you get the expenses paid towards the assured sum? With this arrangement, the insurer is responsible for reimbursing the charges if the policyholder outlives the period in question. The sum then becomes their maturity benefit. An endowment plan offers maturity benefits toward the end of the policy period.

      6. If the Policyholder Passes Away

 

Term protection offers bereavement benefits to the policy recipients in case of the policyholder’s unexpected passing. Since the sum guaranteed1 in term protection is higher, the sum received should be all that anyone would need to cover the family’s financial responsibilities. There are death benefits in endowment plans too. However, the sum insured doesn't necessarily have to be enough to cover the family’s financial requirements.

 

Which One Should You Choose?

The insurance plans have a set objective: keeping your family safe when they need it the most. Hence, this should not be your only source of investing or saving money. Then again, both term insurance plan and endowment plans must be benefited by the policyholder relying on their financial objectives.

Market experts believe that insurance is an instrument that should not be mixed with your other sources of investments, giving an edge to unfiltered tools such as term insurance plans over endowment plans.

Endowment plans put policyholders’ money in different instruments and charge higher premiums that ensure insurance and substantial savings. Likewise, these plans deduct charges against death benefit, among other charges, and return the sum that remains to the policyholder upon maturity. It is prudent to go for an unfiltered term insurance plan if your end objective is to benefit from the protection. The Tata AIA Life Insurance term plan offers excellent benefits such as accelerated payouts, discounted premium rates, monthly income payouts, and several more.

Essentially, for the individuals who have a term protection plan set up and are looking for investment options, endowment plans could be a decent alternative. Since unfiltered term plans come at extremely low expenses, purchasing something similar for security intentions is the best way to go.

If your family is essentially dependent on you, you must have a term protection plan. However, if they are financially sound and will remain so, even after your demise, and a term plan won’t make much of a difference to them, you may want to settle for an endowment plan.

Are you looking for a comprehensive term insurance plan? Make a wise choice to ensure your family’s safe financial future! Buy a comprehensive term plan online today!

 

L&C/Advt/2021/Jun/0889

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Disclaimer
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you
  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this document is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.