If you’ve ever been sold a life insurance policy that also “grows your money”, there’s a very good chance you were sold an endowment plan or a ULIP — and not a genuine protection product.
What is Term Insurance?
Term insurance is pure protection. You pay a premium, and your family receives a large sum assured (e.g., ₹1 crore) if you pass away during the policy term. If you survive, there is no payout. This makes premiums very affordable — as low as ₹8,000–₹12,000 per year for a ₹1 crore cover for a healthy 30-year-old.
What is an Endowment Plan?
An endowment plan combines insurance and savings. You pay a higher premium, get a lower cover amount, and receive a maturity benefit if you survive. Sounds attractive — but the internal rate of return (IRR) on most endowment plans is a mere 4–5% per annum.
The Better Strategy
Buy a high-cover term plan for pure protection, and invest the premium difference into equity mutual funds via SIP for wealth creation. This “Term + Mutual Fund” combination almost always outperforms endowment plans significantly over 15–20 years.