Term Insurance vs Endowment Plans: What's the Difference?
Two very different LIC plan categories, often confused — here's how to tell them apart and when each fits.
The Core Difference
A term insurance plan pays a death benefit only — if the life assured survives the policy term, nothing is paid out, which is why the premium is comparatively low for a given sum assured. An endowment plan pays a maturity benefit on survival and a death benefit if the life assured dies during the term — but at a meaningfully higher premium for the same sum assured, since it is partly a savings product.
Which Should You Choose?
| Term Insurance | Endowment Plan | |
|---|---|---|
| Primary purpose | Pure protection | Savings + protection |
| Premium for a given sum assured | Lower | Higher |
| Payout if you survive the term | None | Sum assured + bonuses |
| Best suited for | Maximising family protection at low cost | A specific savings goal alongside some protection |
A Common, Efficient Combination
Many financial planners suggest combining a sizeable term plan (for protection) with a smaller, separate endowment or child plan (for a specific savings goal), rather than relying on one large endowment policy to serve both purposes — since a single endowment plan providing enough cover for full family protection would typically require a very high premium.
Frequently Asked Questions
Not necessarily bad — it serves a different purpose (disciplined savings with protection) than a term plan (pure protection). The right choice, or combination, depends on your specific goals.
These are generally separate products; rather than converting, most customers add a savings-oriented plan alongside their existing term plan when a savings goal arises.
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