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Should you go for an endowment life cover or for a term plan?

While there is nothing wrong with a sales pitch, especially for a critical need such as insurance, it is often what you are pitched that is the issue. The pitch is most of the time for an endowment plan with a life cover.

Many of you would have had an encounter with an insurance agent at some point and probably early in your career. They often happen to be distant relatives or family friends in many cases, and thus listening to their pitch often becomes an obligation. 

While there is nothing wrong with a sales pitch, especially for a critical need such as insurance, it is often what you are pitched that is the issue. The pitch is most of the time for an endowment plan with a life cover. 

It is dubbed as a way to get a “guaranteed” sum of money at the end of the coverage period, save tax, and at the same time get a life cover. All for a small sum of a lakh or two a year (depending on the sum assured).

But is it as attractive as it sounds?

Let’s simply look at the numbers based on some “popular” non-term endowment plans and examine the issue.

Assumption for a 30-year-old male:


You will be putting in a total of Rs 15000 for each month for 15 years. That’s about Rs 27 Lakhs in 15 years. 

You can check these numbers for yourself on any insurance company’s website. You will get a similar range of figures depending on your specific variables.

Does this make sense?

To really understand why this isn’t such a great plan of action, let’s understand what will happen if you put the same Rs 15000 each month in different investment options.


Even an investment of the same amount in an FD, will yield a sum much higher than the maturity amount of the endowment plan. Keeping your money in the bank account itself will net you almost as much as the highest sum at maturity.

Does something seem off to you, with the endowment plan?

Even an investment of the same amount in an FD, will yield a sum much higher than the maturity amount of the endowment plan. Keeping your money in the bank account itself will net you almost as much as the highest sum at maturity.

But you would be wondering, what about the insurance?

The cost of a Rs 25 Lakh term plan in most cases is about Rs 3800 a year or Rs 314 per month. A Rs 1 Cr term plan is available for about Rs 7200 per year or about Rs. 600 per month.

The total cost over 15 years for a Rs 25 Lakh term plan would come to a grand total of Rs 57000. For a Rs 1 Cr term plan? About Rs 1.1 lakh.

This is an expense and you will not get back this money. However, even if you deduct this amount from what you will receive from putting your money in an FD, you’d still get back a lot more than what the “sum-assured” or even the “maturity amount” of an endowment plan offers.

And we are talking about a Rs 1 Cr life cover, not a 25 Lakh one. 

Take a considered decision

Insurance is an expense. But many of us are taught that it should also be a “money back” thing. Nothing could be farther from the truth. Insurance is designed to handle the uncertainties in our life. We are buying protection, literally. 

So why pay more for protection than you need to absolutely? Especially when your money can earn almost twice the amount if invested appropriately considering the time period.

Think about it.

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