In today’s world, everyone is becoming tense about the security of their future, thereby increasing the popularity of different insurance policies. Also, we all want to save money for the future stability of our family and loved ones. So, the insurers have devised a solution that merges the best of both worlds: endowment term insurance policies. These innovative policies offer a unique combination of protection and savings, providing individuals with a comprehensive financial safety net.

In this article, we will delve into the intricacies of endowment policies, exploring their benefits, drawbacks, and everything in between. Whether you're a savvy investor or a cautious planner, join us as we unravel the secrets of endowment term insurance policies.

What are Endowment Life Insurance Policies?

Endowment life insurance policies are a type of insurance that have two components - Insurance + Cash Value. This cash value is invested by the insurance companies, and the policyholder can borrow against it or withdraw it, similar to a savings account. In simple terms, an endowment policy is a savings plan with a life insurance component. When you purchase an endowment policy, you pay regular premium for a fixed period, which can range from 5 to 30 years, depending on the policy.

At the end of the policy term, you receive a lump sum payment, which is known as the maturity value. If the policyholder dies before the end of the policy term, the beneficiaries receive a death benefit, which is usually higher than the premiums paid.

How Do Endowment Policies Work?

Meaning, Endowment policies work by combining a death benefit with a savings component. When a policyholder takes out an endowment policy, they agree to pay premiums for a set period, usually between 10 and 25 years. The insurance company invests a portion of these premiums, and the returns are added to the policy’s cash value.

At the end of the policy term, the policyholder receives the cash value of the policy plus the death benefit, which is usually a multiple of the policy’s face value. If the policyholder dies before the end of the term, their beneficiaries receive the death benefit.

The premiums can be paid monthly, quarterly, half-yearly, yearly according to the choice of the policy holder.

Endowment policies also offer some flexibility to policyholders. They can choose to add additional coverage, such as critical illness or disability coverage, to their policy for an additional premium. They can also choose to borrow against the cash value of the policy or surrender the policy for its cash value if they no longer need the coverage.

Types of Endowment Life Insurance Policies

Endowment life insurance policies come in several types, each with its own features, benefits, and drawbacks. Understanding the differences between these types can help you choose the right policy for your needs.


Traditional Endowment Policies

Unit-Linked Endowment Policies

With-Profit Endowment Policies

Full Endowment Policies




Fixed or flexible

Fixed or flexible


Insurance component

Investment component

Insurance + Investment

Insurance + Investment

Cash Value







Based on investment performance

Participated in company profits

Based on investment & company profits





Moderate or High

Policy Termination

Maturity or Death

Maturity or Death

Maturity or Death

Maturity or Death






Benefits of Endowment Policies

Endowment policies offer several benefits to policyholders, including :

  1. Tax advantages: Endowment policies offer several tax advantages, including tax-free growth of the policy’s cash value and tax-free payouts to beneficiaries. According to the section 80C tax deductions, the policy holder can get upto 1.5 lakh of tax benefits on the premium payments.
  2. Flexibility: Endowment policies offer some flexibility to policyholders, allowing them to add additional coverage or borrow against the policy’s cash value if needed.
  3. Low risk investment : with the help of insurance and safe investments, endowment plan provides approximately 8-10% of returns at a low-risk.
  4. Bonus : Some endowment policies also offer bonus along with the maturity amount, once the policy holder declares the plan.
  5. Investment growth: The savings component of endowment policies can provide significant investment growth over the policy term, which can help policyholders achieve their long-term financial goals.
  6. Loan Facility : The policy can be used as a collateral for taking loans against it.

Drawbacks of Endowment Policies

Endowment policies also have some drawbacks, including:

  1. Cost: Endowment policies can be more expensive than other types of life insurance policies, as they include both insurance coverage and a savings component.
  2. Limited investment options: Endowment policies typically offer limited investment options, as the insurance company manages the investments.
  3. Risk: Unit-linked endowment policies are subject to investment risk, as the value of the policy’s cash value is dependent on the performance of the underlying investments.
  4. Limited liquidity: Endowment policies have limited liquidity, meaning that policyholders may not be able to access the cash value of their policy without incurring penalties or surrender charges.

Who Should consider an Endowment Life Insurance Policy?

Endowment policies are not for everyone. They may be suitable for individuals who:

  1. Have specific long-term financial goals, such as saving for a child's education or a down payment on a house.
  2. Want to combine life insurance coverage with long-term savings.
  3. Are willing to commit to regular premium payments for a fixed period.
  4. Are looking for a safe and guaranteed way to save money.

However, if you are looking for a more affordable life insurance option or want more control over your investments, an endowment policy may not be the best choice. It’s essential to compare endowment policies with other types of life insurance policies to determine which one is right for you.


Endowment life insurance policies offer both insurance coverage and savings benefits, making them a popular choice for many people. They offer investment growth, a guaranteed payout, tax advantages, and flexibility. However, they can be more expensive than other types of life insurance policies, offer limited investment options, and carry investment risk. It’s essential to weigh the benefits and drawbacks of endowment policies and compare them with other types of life insurance policies to determine which one is right for you.


When is the right time to buy an endowment policy?

The right time to buy an endowment policy is when you have a long-term financial goal and want to combine insurance and savings.

What is the tenure of an endowment policy?

The tenure of an endowment policy can vary from 10 years to 30 years depending on the policy terms and conditions.

What is the difference between full life policy and endowment policy?

The main difference between a full life policy and an endowment policy is that a full life policy provides life cover for the entire life of the policyholder, while an endowment policy provides life cover for a specific term and also offers savings benefits.

What are the disadvantages of endowment policy?

The disadvantages of an endowment policy include lower returns compared to other investment options, surrender charges in case of early termination, and a long lock-in period.