February 23, 2013 10:04 am
What are the differences between Term Plan & Endowment Policy?
@ Free Financial Calculators & @ Ashal Jauhari
Thanks to both of you for answering.
Dear Ajita, in case of term plan, for a 100 Rs. prem. You may get an insurance of 100 to 1000 Times. I.e. a sum assured of 10000 Rs. to 100000 Rs. You die in between the term, your family get that sum assured. You outlive the policy term, you get nothing.
In case of Endowment, for a 100 Rs. prem. you may get an insurance of 5 times to 40 times i.e. 500 Rs. to 4000 Rs. If you die in between the term of policy, your family ‘ll get sum assured + some more money. If you outlive the term, you ‘ll get a corpus i.e. return on your paid prem. The endowment policy can be a pure debt based traditional plan or Unit linked plan.
term plan: you pay a sum to a company to provide life insurance. You die your nominee gets money. If you survive the policy term. You get nothing.
Endowment: It has the above component (but usually much less sum assured) plus an investment component where you a small portion of the companies profits (bonuses). Usually the returns are like 6-7.5% or so.
The general thumb rule is not to mix investment and insurance like once shouldn’t drink and drive because investing a lot of money in an instrument giving low returns will not beat inflation.
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