Insurance comparison · Updated 2026
Term InsuranceVSEndowment
Pure protection vs insurance-cum-savings. Which is actually better for your family's financial security?
Your details
Cr
0.510
%
6%18%
Your current age
years
Policy term
years
Term insurance annual premium
₹12,000/yr
Estimated for non-smoker, ₹1Cr cover, age 30, 30yr term
Endowment annual premium
₹6,000/yr
Estimated LIC-type plan, ₹1Cr cover, age 30, 30yr term
🤔
Endowment gives ₹2.00 Cr more maturity value
At 12% SIP return, the premium difference invested builds ₹35.30 L which is less than the endowment's ₹2.35 Cr. Try increasing the SIP return assumption.
Term cover: ₹1.00 Cr (same)Endowment IRR: 24.9% p.a.
Detailed comparison — ₹1Cr cover, 30 years, age 30
Term Insurance + SIP
Annual premium₹12,000
Total premiums paid₹3.60 L
Life cover₹1.00 Cr
Survival benefit₹0 (pure protection)
Saved vs endowment₹-6,000/yr
SIP from savings₹-500/mo
SIP corpus @ 12%₹35.30 L
Premium/lakh cover₹120/yr
Wealth created
₹35.30 L
Cover + corpus if alive
VS
Endowment Plan
Annual premium₹6,000
Total premiums paid₹1.80 L
Life cover₹1.00 Cr
Bonuses accrued₹1.35 Cr
Maturity amount₹2.35 Cr
Survival benefit₹2.35 Cr
Effective IRR24.9% p.a.
Premium/lakh cover₹60/yr
Maturity value
₹2.35 Cr
Sum assured + bonuses
Endowment gives ₹2.00 Cr more· at 12% SIP return assumed
What the premium difference (₹-6,000/year) can become
SIP @ 12%
−₹17.65 L
in 30 years
FD @ 7%
−₹6.14 L
in 30 years
PPF @ 7.1%
−₹6.18 L
in 30 years
The "Buy term, invest the rest" strategy
Pay ₹12,000/year for ₹1.00 Cr term cover. Invest the saved ₹-6,000/year in a 12% SIP. After 30 years, your family has full ₹1.00 Cr protection if you die AND you've built ₹35.30 L in corpus if you survive — vs endowment's ₹2.35 Cr with the same cover.
At what SIP return does Term + Invest beat Endowment?
Endowment maturity target: ₹2.35 Cr
| SIP return | SIP corpus (diff invested) | vs Endowment maturity | Winner |
|---|---|---|---|
| 4% | −₹3.48 L | −₹2.38 Cr | Endowment |
| 6% | −₹5.05 L | −₹2.40 Cr | Endowment |
| 8% | −₹7.50 L | −₹2.43 Cr | Endowment |
| 10% | −₹11.40 L | −₹2.46 Cr | Endowment |
| 12%(selected) | −₹17.65 L | −₹2.53 Cr | Endowment |
| 14% | −₹27.79 L | −₹2.63 Cr | Endowment |
| 16% | −₹44.35 L | −₹2.79 Cr | Endowment |
Term vs Endowment — head-to-head features
| Feature | Term Insurance | Endowment Plan |
|---|---|---|
| Premium for ₹1Cr cover | ₹10,000–20,000/yr | ₹60,000–80,000/yr |
| Death benefit | Full sum assured (₹1Cr) | Sum assured + bonuses |
| Survival benefit | Nothing (pure risk cover) | Maturity amount (SA + bonuses) |
| Effective IRR on premiums | Not applicable (pure cover) | 4–6% (endowment returns) |
| Premium payment | Lower — only for protection | Higher — savings component included |
| Tax deduction (80C) | Premium qualifies under 80C | Premium qualifies under 80C |
| Tax on maturity | Death claim: tax-free | Maturity: tax-free u/s 10(10D) |
| Flexibility | High — cancel anytime | Low — lapse penalty if you stop |
| Best suited for | Primary breadwinners, young parents | Conservative investors wanting guaranteed returns |
| Investment quality | Not applicable | Poor (IRR 4–6% vs 12%+ equity) |
| Insurance quality | Excellent — maximum cover for low cost | Poor — high cost per lakh of cover |
Term vs Endowment — Why Almost Every Financial Advisor Recommends Term
Life insurance in India is sold primarily as an investment product — which is exactly the problem. Endowment plans, money-back plans, and ULIPs bundle insurance with savings, promising to "return your money" if you survive the policy term. This sounds appealing, but the math consistently shows it's one of the worst financial decisions most Indians make.
A term insurance plan provides pure death benefit — if you die during the term, your family gets the sum assured. If you survive, you get nothing. No maturity amount, no bonuses, no "return of premium." This sounds bad until you calculate what you could do with the enormous premium savings.
Why endowment plans deliver such poor returns
The Internal Rate of Return (IRR) on a typical Indian endowment plan is 4–6% per year. This is the true mathematical return you're earning on the premiums you pay. To put this in perspective:
| Investment option | Expected return | ₹60,000/year for 20 years becomes | Tax treatment |
|---|---|---|---|
| Endowment plan (LIC-type) | 4–6% IRR | ₹20.64 L | Tax-free maturity u/s 10(10D) |
| PPF | 7.1% (guaranteed) | ₹26.63 L | EEE — fully tax-free |
| Equity SIP | 12% (historical) | ₹49.96 L | 10% LTCG above ₹1L/yr |
| Mid-cap SIP | 14% (historical) | ₹65.82 L | 10% LTCG above ₹1L/yr |
When does endowment actually make sense?
Despite the mathematical verdict, there are genuine situations where endowment plans serve a purpose:
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For people who cannot invest without forced discipline — Some people spend whatever's in their bank account. An endowment premium deducted automatically and "locked in" creates forced savings that wouldn't otherwise happen. A 5% return on money you'd have spent is better than 12% on money you never invested.
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Conservative investors who genuinely cannot tolerate any investment risk — For someone who would never touch equity mutual funds, an endowment's guaranteed maturity beats leaving the money in a savings account indefinitely.
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When cover amount needed is small (under ₹25L) — For smaller coverage amounts, term insurance is less dramatically cheaper, and the premium savings that get reinvested are also small. The endowment's guaranteed return becomes relatively more competitive.
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As part of estate planning for very high net worth individuals — Certain endowment structures (particularly from large LIC policies) have specific tax and legal advantages in inheritance scenarios that can be relevant for HNI estate planning.
How much term cover do you actually need?
| Annual income | 10× income (recommended) | 15× income (comfortable) | 20× income (ideal) |
|---|---|---|---|
| ₹5L/year | ₹50L | ₹75L | ₹100L |
| ₹8L/year | ₹80L | ₹120L | ₹160L |
| ₹10L/year | ₹100L | ₹150L | ₹200L |
| ₹15L/year | ₹150L | ₹225L | ₹300L |
| ₹20L/year | ₹200L | ₹300L | ₹400L |
| ₹30L/year | ₹300L | ₹450L | ₹600L |
| ₹50L/year | ₹500L | ₹750L | ₹1000L |
Calculate your SIP wealth
See how monthly savings grow into a retirement corpus
Frequently asked questions
Is term insurance's death benefit tax-free?▼
Yes. The death claim received by the nominee is fully tax-free under Section 10(10D) of the Income Tax Act — there is no limit on the amount. The premium paid also qualifies for Section 80C deduction (up to ₹1.5L combined limit). This makes term insurance the only financial product in India where you contribute under 80C, and the benefit (on death) is completely tax-free without any maximum limit.
What is 'return of premium' term insurance and is it worth it?▼
Return of Premium (ROP) term plans refund all premiums paid if you survive the policy term — combining pure term with a survival benefit. The catch: ROP premiums are 2–3× higher than regular term plans. The mathematical verdict mirrors endowment: you'd be better off buying a cheaper regular term plan and investing the premium difference in a SIP. ROP plans typically have an implied IRR of 4–6% on the 'returned' premiums — nearly identical to endowment plans but with better death coverage.
Can I convert my existing endowment policy to term?▼
You can't directly convert an endowment to term insurance, but you have options. You can surrender the endowment policy (you'll receive the surrender value, which is typically less than total premiums paid for the first 3 years, and may be less than total premiums for 5–7 years). Then use the surrender value as a lump sum investment and buy a new term policy. Alternatively, you can make the endowment policy 'paid-up' — stop paying premiums, keep the policy active at a reduced sum assured, and redirect premiums to term insurance + SIP.
What happens if I can't pay term insurance premiums?▼
Most term policies have a 30-day grace period for missed premiums. If you miss the payment and the grace period expires, the policy lapses. During the lapse period (typically 2 years from last paid premium), you can revive the policy by paying outstanding premiums plus interest (usually 6–8%) and passing a health check-up. Unlike endowment plans, lapsing a term plan doesn't cause financial loss beyond the missed coverage period — there's no surrender value to lose.
Should I buy term insurance even if I'm healthy and young?▼
Absolutely, and the younger the better. Term insurance premiums increase with age and are locked in at the time of purchase. A 30-year-old non-smoker can get ₹1 crore cover for ~₹10,000–12,000/year for 30 years. The same cover at age 35 costs ~₹15,000–18,000/year. Waiting 5 years costs an extra ₹1,50,000–₹1,80,000 over a 30-year policy. Additionally, buying young means you're more likely to pass the medical underwriting, and any subsequent health issues won't affect your already-issued policy.