What is a Term Insurance Plan?
Term insurance is an insurance plan that provides the policyholder with life insurance. This insurance policy is simple and continues for a prolonged length of time. The insured parties determine the "period" for which they need life insurance.
The beneficiary earns a claim if the insured dies within the policy's term. The establishment of such a payout takes place at the time of the purchase of the term insurance.
Like other insurance schemes, it requires regular fee payments to remain in effect. It's crucial to remember that a basic term insurance policy only provides a death payout. Thus, there is no payment of the same if the policyholder outlives the term.
What is an Endowment Plan?
Another well-liked life insurance option offered in India is endowment insurance. It is pretty much like a unit-linked insurance policy. It provides the combined benefits of investing and insurance. But, several characteristics of an endowment policy set it apart from a term plan.
With an endowment plan, one may set aside money regularly for a certain amount of time. If the insurance matures after the time frame, they could receive a lump sum payout. Only if the insured lives through the policy's period is it payable.
Insurance coverage comes into play if the insured dies within the policy's term. The payout, in this case, will be the sum guaranteed and any relevant bonus to the beneficiary.
How is a Term Insurance Plan Different from an Endowment Plan?
- Term insurance is a type of life insurance that provides the insured with life coverage. A life insurance scheme with both savings and insurance is an endowment plan.
- People who wish to aid their family's finances in their absence should buy term insurance. An endowment plan is most suitable for those looking for insurance coverage and wealth-creation or saving prospects.
- Term insurance is well recognised for being inexpensive. Long-term life insurance is available at a low premium cost. Endowment plans include both insurance and investing aspects. This is why it charges a more significant insurance premium than term insurance.
- Term insurance is not a means of saving money. The benefits of an endowment policy can be seen as long-term savings or savings out of your income for the future.
- According to your salary, you may choose the term policy's sum assured from ₹10 lakhs to a few crores. However, a more extensive sum promised under an endowment plan entails a higher premium.
- A pure-term insurance plan rarely has any maturity perks. But, if you choose a return of premium rider, you can earn back your insurance premiums. This is only possible if you survive the duration of the insurance. An endowment plan has maturity benefits after the term of the policy is over.
- It is not possible to liquidate the stake in term insurance. An endowment policy helps in the event of a financial emergency. Then, it allows for progressive transactions of the sum promised.
Should You Invest in a Term Plan or an Endowment Plan?
- Expenses pattern: You can compare the viability of term insurance vs endowment plans. This comparison draws from the costs you must manage with your income.
- Budgetary goal: Planning out your needs helps you compare term insurance and endowment plans.
- Affordability: By evaluating your economic status, you may choose which of the options is most appealing to you.
- Financial goals: Budgeting is successful if you have a clear understanding of your long-term goals. It helps you make an informed choice between term insurance and endowment policies.
Invest for higher returns by comparing term insurance to endowment plans. Such a comparison involves figuring out your financial requirements in life. To know more about term insurance riders, retirement planning , and more visit PNB MetLife website.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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