Quick Overview

A term plan is a pure life cover at low premiums. If the policyholder dies during the term, their nominee(family) receives the death benefit. There’s no return if the policyholder survives, unless it is a ROP variant (usually 50-100% costlier than regular term plans).

An endowment plan combines life insurance coverage with a savings component. The family receives the sum assured on death. If the policyholder survives, they get a maturity benefit. However, these plans yield modest returns and incur higher costs because they have to return your money if you survive the policy period.

Choosing between a term plan and an endowment plan can be confusing when budgets and responsibilities compete for attention. The right choice depends on your life stage and priorities. This guide will help simplify the difference so you can decide with clarity and confidence.

Not sure which plan will align with your future financial needs? Book a free call with us and let our experts guide you to make the correct decision.  

How Do Term and Endowment Plans Work?

Before we understand the differences, it’s important to understand how term and endowment plans work. 

Difference Between Term Insurance and Endowment Plan

AspectEndowment PlanTerm Insurance 
PurposeLimited protection with savingsPure life protection
PremiumsHigh (₹60,000-1,00,000 for ₹10-15 lakh cover)Low (₹12,000-25,000 for ₹ 1 crore, depending on age) 
Life CoverLower (5-10x annual premiums)High (20-30x yearly income)
Maturity BenefitYes, but comes at a high costNil (unless ROP opted)
Returns4–6% (barely beats inflation)Nil
FlexibilityMostly rigid and limited customizationMore choices and add-on options
Surrender ValueAvailable as per the terms and conditions and IRDAI rulesNone unless opted for ROP or a Zero-cost term plan
LiquidityMoney is locked until maturityPremium savings can be invested in redeemable FDs, mutual funds
Best ForOnly worth considering if the person is very risk-averse or not eligible for a term planAnyone who needs low-cost, high-level protection for their financial dependents

How To Choose Between Term Insurance And Endowment Plan?

  1. Early in Your Career: A term plan offers high life cover at a low cost, so your family stays protected without straining your income.

Term Plan Premiums Across Ages

AgeHDFC C2P SupremeICICI Iprotect Smart PlusAxis Max Smart Term Plan Plus
25₹21,003₹17,014₹18,400
30₹26,471₹21,237₹22,556
35₹35,241₹28,238₹28,506
40₹44,798₹39,594₹38,760

Note: The listed premiums are for a non-smoker profile, male with a sum assured of ₹ 2 crore (Coverage till age 70, without first year discounts). Premiums can vary widely based on smoking habits, BMI and medical history, occupation, policy term, and the insurer’s underwriting rules.

  1. Looking to Save with Insurance: Endowment plans combine savings and cover, but cost more, lock your money for years, and usually give low returns.
  2. Married or Have Kids: A term plan provides strong financial protection for your spouse and children if something happens to you.

Strategies to Make the Right Choice

Term PlanEndowment Plan
You have dependents (spouse/parents/kids) relying on your incomeYou want a forced saving mechanism, ie, you are inconsistent with your investments
You have loans (home loans, especially)You’re okay with lower insurance cover for the same premium
You want maximum cover in your budgetYou want a maturity payout and prefer stability over maximizing returns
You already invest (or are willing to invest) separatelyYou already have pre-existing adequate term cover
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Ditto’s Take on a Balanced Approach

The smarter strategy is to separate insurance and investments. Buy a pure term plan for strong life cover at a low cost, and invest your savings in options that can grow faster over time. This protects your family and builds wealth at the same time.

Instead of a low-return bundled plan, buy a high-cover term plan. Invest the remaining amount in SIPs, PPF, or NPS based on your goals. Over 15–20 years, this approach can create a much larger corpus.

One should consider endowments only if they are not eligible for a term plan due to medical or income eligibility reasons. However, if the primary goal is maximum life protection per rupee, term insurance wins almost every time.

Why Choose Ditto for Term Insurance?

At Ditto, we’ve assisted over 8,00,000 customers with choosing the right insurance policy. Why do customers like Vijay below love us:

What is the Difference between Term Plan and Endowment
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Final Thoughts

Endowment plans like Axis Max SWP and HDFC Life Sanchay Plus are niche products. They mix life insurance with guaranteed savings, but come with clear trade-offs: higher premiums and much lower life cover when compared to pure term insurance plans.

If you are looking for a term plan from insurers with established track records and affordable riders, we recommend comprehensive plans, which align with your long-term goals. Explore more about how our experts evaluate term plans through Ditto’s cut.

Frequently Asked Questions

Do endowment plans offer tax benefits?

Yes. Under the old tax regime, premiums qualify for a deduction up to ₹1.5 lakh under Section 80C. The maturity payout is usually tax-free under Section 10(10D) if premiums do not exceed 10% of the sum assured.

What happens if I surrender an endowment plan early?

You usually lose money, and there is no payout in the first year. In early years, you may get only 30–50% of premiums back. In case you are near maturity, it can rise to 90%.

Can I switch from a term plan to an endowment plan later?

Not usually. Older term plans like LIC Assurance Plan had a conversion option, but most modern term policies in India no longer allow switching to an endowment plan.

Can I buy both term insurance and an endowment plan together?

Yes. You can use a term plan for high, low-cost life cover and add a small endowment plan for disciplined savings. This balances protection and savings without straining your budget.

What happens if I stop paying premiums on an endowment plan?

Once the policy gains surrender value, it usually does not lapse. It continues as a paid-up policy with reduced benefits, as per the policy’s terms and conditions.

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