The requirement of the hour is to be prepared for any form of financial misfortune. There are numerous financial products on the market to meet your requirements. One such product is life insurance, which is designed to provide financial security for your family in the event of an unanticipated incident. With so many different types of life insurance products to choose from, it can be tough to know which is best. The straightforward answer is to choose the product that best meets your and your family’s financial needs. Let’s compare and contrast endowment and term insurance plans to see which is best for you.
What is a Term Insurance Plan and How Does It Work?
Term insurance is a type of insurance that offers financial protection for a set period of time, known as the policy’s term. If the policyholder dies within the policy’s term, the death benefit is paid to the beneficiary as a lump payment.
What is an Endowment Plan, and how does it work?
Through continuous savings, an endowment plan provides both security and growth of money. It is a combination insurance and investment policy that provides not only life insurance but also a maturity benefit that can assist you in fulfilling various financial goals such as children’s schooling and wedding expenses.
- Maturity Benefit and Death Benefit:
The beneficiary of a term plan receives a death benefit. If a policyholder lives to the end of the policy’s term, there are no returns unless the policyholder has chosen a premium term plan return. A death benefit and a maturity benefit are both provided under an endowment plan.
- Amount Guaranteed:
A term plan’s sum assured is 15-20 times the policyholder’s annual income and is solely utilised as a risk cover. A large sum assured in an endowment plan means higher premiums. Because it is separated into insurance cover and investment, the sum assured as maturity benefit is not as great as the sum assured of a term plan.
- Suitability:
A term plan is appropriate for someone seeking pure risk protection. Someone who wants both risk protection and wealth building should consider an endowment plan. An endowment plan is appropriate for you if you have financial goals and also need insurance coverage.
- Insurance vs. Investment: Which is Better?
You should select a plan that best meets your financial needs based on your principal goal. If insurance is your primary goal, consider purchasing a term insurance plan, which offers a significantly bigger sum assured for a much lower price. However, if investing is your primary aim, you might consider an endowment plan, which can help you meet your financial goals in the long run.
Regardless of whether you choose an endowment or term insurance plan, it must meet your needs. It should be able to cover your family’s financial needs while you are away. If making an investment is your goal, make sure the returns you’ll obtain are worth the money you’ve put in. An endowment plan is suitable for you if you have a consistent income and are risk averse. Before choosing a plan, always examine and understand different types of insurance policies, and it is advisable to spend early to gain the most advantage.