Term Life Insurance plan or Endowment life insurance plan

The above question always comes up when ever we purchase any insurance product. Every time we baffled and select wrong product most of the time obviously such wrong choice sometimes hamper our future anticipation. Let’s understand both product then we compare.

Term Plan, as name suggested, it is for specific period of time i.e. 5/10/15/20/30 years. It is the purest and cheapest form of insurance. In case of unexpected death, dependents /nominee will receive cover amount. This policy do not give any maturity benefit however provide high cover at less premium.

Now a days online term plans are also available which you can take directly.

Endowment Plan are contracts designed to give two benefits sum assured in case of death or Maturity amount if policy holder survived the term.

After knowing both any one can choose Term plan over Endowment  plan. But insurance agent will always guide to buy endowment plan (In that case they are most precious blessing of God and they are our well wisher).

Then why every financial planner suggests Term Plan?

Sadly we are still not looking into bigger picture. Let’s understand it with a simple example:

Particulars	Mr. X	Mr. Y
Plan Choice	Term	Endowment
Age	30	30
Term	15	15
Sum Assured	1000000	1000000
Approx. Premium Yearly	2356	67000

Now as Mr. X is saving around 64644/- yearly on premium so he invested this excess in market (secured fund) and earns 9% return annually. While Mr. Y is relying on endowment plan savings.

After 15 Years
Particulars	Mr. X	Mr. Y
Plan Choice	Term	Endowment
Age	30	30
Term	15	15
Sum Assured	1000000	1000000
Sum for investment	64700	0
Return on investment	9%	SA + Bonus
Bonus	0%	30000/ year
Return	1946000	1450000

In above case Mr. X. earning better returns then Mr. Y. Now it’s very evident that in any case Term plan is far better choice then endowment plan.

Note : This calculation is done on the basis of consideration that the investment made by Mr.X earns him 9% pa returns.

I know you are enough smart to take a right decision.

About author : Article is written by Hitesh Paliwal , Risk analysis and insurance consultant with ARB financial consultants, You can reach him on 8551905999