In today’s fast-paced world, there is no assurance with respect to what an individual may need to look to the future. Various financial tools in the market deal with this viewpoint by offering investment and saving avenues for customers so that even in the face of adverse events, financial adversity does not become a challenge.
What is Term Insurance?
Term Insurance is a financial protection tool that offers protection cover for a particular number of years. Amid this term, if the policyholder dies, at that point his family is qualified for getting a death benefit in terms of pre-determined lump-sum amount.
Endowment Plan: How about a plan that offers Protection cover + Investment! Sounds good?
An endowment plan does precisely that. It functions as a protection-cum-investment instrument. Through your critical days, it serves as a financial cover tool for your family. At the same time, it continues to multiply the money invested for your good days. On the off chance that you survive the entire term duration of the policy, you can gain back the sum assured amount at the time of maturity.
|Term Insurance||Endowment Policy|
|Covers uncertainties of life||Combines insurance + investment|
|An absolute must financial tool for everyone||An investment tool for customers who wish to grow their money while availing protection too|
|Death benefit sum assured is 10-20 times more than your annual income||Maturity benefit sum assured is not much but decently sufficient as investment option|
|A necessary offering for those who have dependents||A product that can be chosen as per preference of customer|
|No maturity benefit available||Maturity benefit available and paid at end of policy period|
|Consists of only death benefit||Consists of both death and maturity benefit|
|Premiums charged are less||Premiums charged are more|
Which One is Better, Term Insurance or Endowment Plan?
The requirement for insurance ought not to be blended with the invest and grow your money. Consequently, insurance instruments and endowment plans ought to be availed by an individual depending upon his/her financial goals. Financial experts are of the view that insurance ought not to be blended with any other financial goal. Consequently, pure insurance products like term insurance have an edge over endowment plans.
Endowment plans to invest your money in stock markets and different instruments and consequently their returns are attached to the movement of the market. This implies there are no ensured returns for endowment plans and as such there may be times when an endowment plan offers returns way below than expectations. Additionally, the premiums for endowment plans are generally higher than those which are paid towards term insurance. Experts recommend not to mix insurance and investment with the goal that profits reaped are effectively more.
Endowment plans invest your money in different instruments and henceforth charge a higher premium that goes towards insurance as well as investment. These plans likewise deduct mortality and other charges and return only the amount that remains, to the policyholder, on maturity. Regularly, the return offered by endowment plans is low when contrasted with the premiums paid towards the same.
It is advisable to go for a pure insurance plan on the off chance that the primary need is to avail protection. Essentially, for the individuals who as of now have a term insurance plan in place and are looking for investment avenues, endowment plan could be a decent choice. Since, pure term plans come at extremely low premiums, purchasing the same for protection purposes is the best strategy.