Difference between term plan and endowment plan / money back
Insurers offer a plethora of products and understanding the nuances and features of each policy/plan can be a daunting task.
Mar 2023
4 mins read
Share:
In this article, we will compare the features of two popular types of policies - Term Plan and Endowment Plan/Money Back Plan.
| Term Plan | Endowment Plan |
| Provides only death benefit | Provides both death and maturity benefits |
| Budget friendly | Expensive |
| No liquidity and maturity options | Options of liquidity and maturity |
| Covers life uncertainties | Combination of investment and insurance |
Term plan is a pure life insurance product that only provides financial protection to your nominee in the event of unfortunate demise. You don’t get the premiums paid over the term of the policy back.
Term Insurance is a life insurance policy that offers coverage for a fixed number of years - the “term” of the policy. If the insured individual passes away when the policy is active, a death benefit is paid to the nominees of the insured individual.
You can purchase a term insurance policy which can provide a certain corpus to your dependents in event of your demise, they would be able to sustain the same lifestyle or pay off existing liabilities without compromising on their dreams due to the sum assured which they would receive from life insurance.
An endowment plan is an insurance cum investment policy where the money grows over time. An endowment plan helps you to save in periodic intervals through additions and bonuses on your invested amount.
An endowment policy is a type of life insurance policy designed to pay a lump sum on maturity or on death. An endowment policy can be used to build a risk-free savings corpus, while providing financial protection for family in case of an unfortunate event. This simplicity of an endowment plan has over the years made it an attractive savings plan for all. A good endowment policy provides you with the confidence to meet any financial emergency in the future.
Unit-Linked Endowment Plans, Non-Profit Endowment Plans, Participating Endowment Plans are some types of endowment plans.
Participating endowment plans, also known as with-profits endowment plans, assist you in building the corpus of wealth over time. When you choose such endowment plans, you are entitled to a sum assured, which is credited at the conclusion of the policy period or if you pass away during the policy term.
Non-Profit Endowment Plans don’t offer additional bonuses on the initial sum assured as you are only receive a certain lump-sum payment.
Unit-Linked Endowment Plans are fixed-term schemes, where your premiums are used to buy units of market-linked investment funds. These policies also provide you with a life cover that can help sustain your family in the event of your untimely demise.
A term plan only provides life cover
Term Plans work like limited life insurance policies. They provide life cover for a specific time. To keep the policy active, you must pay premiums at regular intervals. In case of untimely demise, during the policy tenure, your nominee receives the sum assured as the policy payout. To enhance your family’s financial protection, you can choose to purchase riders or add-ons. Term insurance protects your family from financial risk in case of untimely demise.
An endowment plan provides dual coverage of insurance and savings
An endowment plan helps you build your financial pool with regular savings. The money received at maturity can be used for various short and long-term financial goals, such as a child’s education, buying a car, post-retirement goals, and more. It also helps you protect your family financially, in case of an unfortunate event, through the in-built life cover. You get the benefit of insurance as well as investment. Your savings continue to build over time and your family stays secure in the case of an unfortunate event.
A term plan does not offer maturity benefits, while an endowment plan offers maturity benefits at the end of the tenure of the plan. A term plan provides a large life cover at affordable cost, while the cover is lower in endowment plans.
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
