When it comes to life insurance knowing what to buy can be confusing with all of the red tape and loopholes that seem to be involved. It doesn’t have to be that way. While you do need to really review policies that you are considering there are two key things to remember. A term plan will only pay your beneficiary the entire death benefit just in the event of your untimely demise whereas with the endowment policy will pay out the whole guaranteed amount that was built over time once the policy tenure is complete.
Endowment vs Term Life
If you are still not sure what to purchase then you will need to examine your own needs and expectation; your family is unique as are the burdens they will carry should you pass. What’s right for one may not be suitable for another, and for this reason, there are different approaches to life insurance.
Take for instance both endowment and term plans fall under the umbrella of traditional life insurance. While they both offer tax savings and are comprehensive, they are both quite different.
Differences Between Term and Endowment
One is a standard insurance policy whereas the other is more of investment. A term plan is a standard policy without any bells or whistles. An endowment is a savings plan of sorts. You won’t have a long term savings option with a term life insurance plan, but the endowment plan will allow you to save for your future.
What About The Premiums?
You will find that a term plan will have far cheaper premiums than endowment plans for the same amount of coverage even if you don’t add riders. However, the endowment plan will pay out more in the end. Keep in mind that the sum assured will vary depending on which plan you select.
A term plan in most cases will allow you to be covered for up to twenty times your income. With an endowment plan, a more substantial amount of money invested annually for your premium would be required to achieve a higher sum assured.
A term plan is obsolete if you die after the tenure of your plan expires and there are no return funds invested. If you outlive the policy tenure of your endowment plan, then the maturity benefit and the sum assured will be paid.
Both term and endowment plans will offer riders. Some are unique to the plan you choose. Hey do cost extra, and are excellent tax saving tools.
So, Which One Should I Buy?
Again, this is a question only you can answer after really considering all of the options and what you want at the end of your life for your family or from your policy should you outlive the tenure of the chosen policy. Everyone will have a different scenario for how they decide to make their final arrangements and what they expect from those arrangements.
Both Plans Will Have Certain Advantages
With term life, the premium will be significantly lower than endowment plans which of the same value. An endowment will offer the death benefit and the maturity benefit whereas term only offers the death benefit. With an endowment insurance plan, you can borrow from the policy whereas with a term you cannot. This will impact the policy and payout, so be sure to read all of the details before borrowing from your policy should you have to do so.
The term will carry your family longer financially whereas an endowment policy will assist in immediate financial burdens after your demise. This is because while term offers higher payouts as a norm, the endowment plan payout will depend on several factors like loans, monies in and market performance for participating plans.
When it comes to beneficial reasons like savings, an endowment plan is by far the best investment. However, if you are seeking a higher coverage with a lower premium, then the term is the way to go. Many are now turning to an endowment for their coverage. This is because in today’s economy people need all of the help they can get. Just a couple of examples of things that endowment can do is to help you purchase a home or save for college.
You can get a return of 2.5% annum over a five-year term with the endowment plan. This is a short policy that guarantees payout, so it offers benefits faster than the long drawn out options. This one also offers free withdrawals and a 105% death benefit with investment options from $1,000 to 500,000 dollars.
Endowment carries a promise of a guaranteed payout either way. You are investing with an endowment policy, whereas with the term it is much like renting, when the term is up the money is gone. Your endowment will carry and build cash value over time. You are paying a bit extra for peace of mind and a whole lot of added benefits.
An endowment is a great place to start investing for your retirement years, and you will still have things in place for your family should the unfortunate event occur before the tenure is done.
