Endowment Plans vs Term Plans: Understanding The Difference

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

Endowment Plans vs Term Plans: Understanding the difference

Endowment Plans vs Term Plans: Understanding the difference
  • 11th Mar 2021 |
  • 1,224

Buying life insurance is a must in today’s fast-paced life, to safeguard your family against financial challenges in case of an unfortunate event. However, different life insurance products serve different financial purposes. Hence, you need to understand the differences to choose the best plan for your specific requirements.

Endowment plans and term plans are two such life insurance products. Both provide payouts to your nominee if an unwanted incident occurs during the policy period. Tax benefits are also available with both products. However, term plans are pure protection plans. But endowment plans combine life insurance with investment.

Term plans

These plans replace your income if your family loses your earnings financial support due to a contingency. It involves no savings component. Therefore, only your nominee gets the sum assured amount if an unfortunate event occurs while the policy is in force. Regular term plans provide no maturity proceeds if you survive the policy term. But return-of-premium plans (TROP) refund the entire premium when the policy tenure ends.

However, your entire premium goes towards securing your life cover. Hence, for relatively low premiums, you can secure sizable coverage to meet your family’s current and future expenses. The payouts can help them repay any outstanding debts, cover their living costs, your children’s education fees, and your spouse’s old-age needs.

Endowment plans

An endowment plan helps you save for the future. Along with the life cover, it increases your invested sum. One part of your premium secures the coverage. The insurer invests another part and shares the profits with you either as bonus payments or guaranteed additions to your capital.

The returns are independent of prevailing market conditions. Most endowment plans guarantee a minimum amount payable at the end of the policy term. Hence, to increase your wealth without facing market fluctuations, you can invest in endowment plans.

Buy Term Plan Now

The following table brings out the points of distinction between the two categories.

Feature Term Plan Endowment Plan
Purpose of the policy Getting life cover to secure family members financial future in adversities Life coverage as well as a long-term investment to create funds for life goals
Maturity benefit No payout unless you opted for a TROP, which returns the premiums paid if you survive the policy period Your invested sum, along with bonuses or guaranteed additions, paid on policy maturity.
Premium Typically the lowest among the different life insurance categories since insurers are required to pay only if the risk covered materializes. Used to secure life cover as well as build a cash value, increasing the cost to the insurer. Hence, premiums are higher than term plans for the same coverage amount.
Sum assured A cover at least 10 -12 times your annual income available at affordable premiums For the same premium amount, the sum assured might be lower, but the invested sum generates decent returns.
Additional benefits Mostly offer add-on benefits for a nominal hike in the premium, such as:

  • Critical illness rider, offering lump-sum payouts on the diagnosis of the life-threatening ailments covered in the plan
  • Accidental Death Benefit, offering extra payouts over and above the sum assured in case of a fatal accident
  • Waiver of premium in case of a permanent disability due to accident, keeping your life cover active without premium payments
All riders available under term plans may not apply to endowment plans.

Kotak Life offers term plans and endowment plans catering to different investor needs. You can download brochures and study the various benefits. It is advisable to include both policy types in your investment portfolio. A combination of term and endowment plans ensures all-round financial protection and growth.

Kotak e-Term Plan

Download Brochure


  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492


Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Why Should New Parents Buy Term Life Insurance?

Understanding Term Insurance Riders

Term Plan with Spouse Cover

Is ₹1 Crore Term Insurance Good Enough Cover?

Term Plans are Definitely Cheaper than You Think!

Comparing Term Plans – What Should You Look Out For

Planning For Son or Daughter's Wedding

What is the Right Term Period For Term Insurance Policy? Here's How You Should Choose!

How to Identify Term Insurance According to Your Needs?

All you need to Know about Term Insurance Plans for housewives

10 Ways to Mentally Refresh After a Stressful Day

What Are Insurance Riders and How to Choose Them in a Term Plan?

How do I Calculate My Term Insurance Premium

Can Term Insurance Plans Be Purchased As A Gift?

Is Term Life Insurance Plan an Investment or Expense?

What are incremental term insurance plans?

Online vs Offline Term Insurance: Which Is The Better Option To Buy

Which Death Type Does Your Term Plan Not Cover?

5 Benefits of Early Retirement Planning

Should Youngsters, Working Couples Buy Term Insurance Plans?

Why Should You Buy Term Insurance in 2022?

Should you buy a Renewable Term Life Policy?

How Much Term Insurance Do I Need

9 Most Frequently Asked Questions on Term Insurance

Does Your Term Insurance Plan Cover Death Due to COVID-19?

Term Insurance with Critical Illness

Should You Buy a Term Plan After 40?

Different Types of Premiums in Term Insurance?

Why Spending Time with Friends is Essential for Your Mental Health?

Insuring Against Accidents with an Accidental Death Insurance Rider

9 Tax Changes in Budget 2019 that may Impact Your Personal Financial Planning

Key Differences Between Term Insurance, ULIPs, And Health Insurance

Term Insurance: What Happens When You Don’t Pay Your Premiums?

What Should You opt for - Limited or Premium Pay?

5 Reasons to Buy Term Insurance When You are in Your 30s

Why Term Plan Should Be The First Step To Securing Your Future?

What Happens if you Hide Facts in your Term Insurance?

What is Critical Illness Policy?

Busting Myths and Facts About Term Insurance Policies

Increasing Term Insurance and Riders

Can You Increase Your Term Insurance Cover?

What is a term insurance plan with a return of premium, and how does it work?

Make Your Online Term Plan Your Family's Monthly Pay Cheque

How Much Term Life Insurance Cover Do I Need?

Why Should You Not Take A Term Plan Without Medical Test in India?

8 Things To Do After Buying Term Insurance

Is Life Insurance Investment Worthy Enough

8 Factors to consider before choosing a Critical Illness Insurance

What Is a Passive Income? Why Should You Use It to Buy a Term Plan?

What Is a Renewable Term Insurance Policy?

Term Insurance Calculator - Everythng You Need To Know

When is the Right Time to Buy Term Life Insurance Policy for Yourself?

9 Point Guide on how to File Income Tax Return Online

10 Ways to Get Your Kids Involved in Your Healthy Lifestyle

How To Choose the Right Term Insurance Plan?

Are The Add-ons and Optional Features of Term Insurance Plans Actually Beneficial?

Term Insurance: Smokers vs Non-Smokers

What are the Tax Benefits of Sukanya Samriddhi Yojana (SSY)?

Key IRDAI Regulations That Changed Face Of Term Insurance Industry In 2020

What is a Joint Term Insurance Plan? Key Benefits of Joint Term Plan

Why You Must Include In Your Financial Planning?

भारत में गृहणियों के लिए टर्म इंश्योरेंस

Insuring yourself against Ill Health with a Critical Illness Rider

Steps on How to Buy Term Insurance Online

Individual Life Insurance vs. Group Term Life Insurance

Why Premium Amount for Term Insurance is So Low?

Advantages & Disadvantages of Term Insurance in India

Insuring Against Disability With Disability Insurance Rider

5 Things To Consider While Buying Term Insurance Plan

How To Choose the Right Sum Assured Under a Term Plan?

Protection for your family

Should you have more than one nominee in your term insurance?

5 Term Insurance Benefits for Single Women

Why Married People Should Buy Term Insurance Under MWP Act?

Why Should You Add a Rider to a Term Insurance Plan?

Is it a Good Time to Buy Term Insurance During the COVID-19 Pandemic?

How to Surrender Term Life Insurance When You Have No Liabilities?

4 Methods to Calculate How Much Term Insurance You Need

Cost of Term Insurance Likely to Increase Soon

Why Surrendering Your Term Plan Policy In The Final Phase Maybe A Bad Idea?

Term Insurance vs Life Insurance: Understand the Difference and Benefits

Calculating Term Insurance Premium

What is Term Insurance? Term Plan Meaning and Definition

6 Types of Death not covered in Term Insurance Plan

Top 3 Reasons Why You Should Buy A Term Plan Now

What Is the Correct Age to Buy Term Insurance?

8 Benefits of Term Insurance You Should Know

Why is it important to buy term insurance plan?

Term Insurance: Most Common Term Insurance Myths Explained | Kotak Life

Know How to Invest at Every Age for Larger Returns

Term Insurance With Riders In India

Ensure Protection Against Death, Disease & Disability With Life Insurance

Can Non-Resident Indians (NRIs) Buy Term Insurance In India?

Why Buy Term Insurance Plan With a High Cover?

What Are the Best Term Insurance Plans for Planning Retirement?

Different Types of Protection Plans

Is There Any Tax Benefit on Term Insurance?

What Types of Deaths Are Covered in a Term Insurance Plan?

6 Reasons That Make Term Insurance a Must Buy

Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products

Term Insurance Plans and Policies for Smokers

Tips to Choose the Right Term Period for Term Insurance Plan

Do I Need to Give a Medical Test for Term Insurance in India?

4 Reasons Why You Need Critical Illness Cover

Make Your Online Term Plan Your Familys Monthly Payout

How Does Term Life Insurance Work? Learn the Benefits

Choosing Riders for Insurance Plans

All about Online Income Tax Calculator

What is Insurance Premium - A Detailed Guide

Term Insurance Age Limit – Term Plan for All Age Groups

What is a short term insurance policy?

Is a Term Insurance Policy Portable?

Reasons You Need Term Insurance Plan as a Self-Employed Person

Is term Insurance Needed for People With No Dependents?

3 Things to Consider When Buying Term Insurance, If You are Single

Tax Benefits of Term Insurance in India

Best Investment Plans for Children - Secure Your Child's Future

Term Life Insurance Plan for Smokers vs Non-Smokers

Can I Buy Term Insurance for a COVID-19 Patient?

How To Calculate The Amount Of Term Life Insurance You Need?

Can I Get Term Insurance on Behalf of My Spouse?

Should You Have Multiple Term Life Insurance Policies?

Why should single women purchase term life insurance?

Eligibility Criteria for Buying Term Insurance in India

Why does every working women need life insurance?

Do You Need Term Insurance Cover After Retirement?

Buying A Term Insurance? Don't Ignore the Claims Settlement Ratio

What Should Be The Duration Of Your Term Plan in India?

Why Buy Term Insurance Even at Rising Rates?

Which Term Insurance to Choose: Lump Sum or Staggered Pay-out Plan?

What is Form 16, Form 16 part A, Form 16 part B, Information Required and FAQs

Planning For Children's Future

कोविड -19 बूस्टर खुराक के दुष्प्रभाव

What are the Documents Required for Term Insurance Plan?

भारत में जीवन बीमा कितने प्रकार के होते हैं?

Gift Your Father A Term Insurance Plan This Father's Day

How Much Cover Should I Take In A Term Plan?

How Does A Term Life Insurance Work in India?

Do Beneficiaries Pay Taxes on Term Insurance?

Insurance Policy for Housewife In India

10-Year Term Life Insurance Policy - Explained in Detail

4 Things To Expect From Your Term Insurance Plan in India

Everything About Claim Settlement Ratio for Term Insurance

What Happens to Term Insurance Plan With No Beneficiary - Kotak Life

Why Term Insurance Is Better Than ULIP?

Can A Housewife Buy a Term Insurance Plan - All You Need to Know

Difference between Section 80C and 80CCC of the Income Tax Act, 1961

What All Documents Required For Term Insurance In India?

How to Compare Term Insurance Online

Can I Make Changes to My Term Insurance Policy Post Purchase?

Why Term Insurance Is Important in times of COVID-19?

Importance of Term Insurance at Every Stage of Your Life

Zero Cost Term Insurance Plan: What is & Should you buy it?

Term Insurance Basics You Should Know

Why 1 Cr Term Plan Is Necessary For Family?

Term Vs. Whole Life Insurance: Which One You Should Buy in India?

टर्म इंश्योरेंस क्या है? टर्म इंश्योरेंस का मतलब

How to Buy 1 Crore Life Insurance Policy Without Medical Test

Is Group Term Life Insurance Provided By Employer Sufficient?

How Not To Get Your Term Insurance Claim Rejected

9 Ways to Help Family Members in Financial Trouble

Ideal Features of a Suitable Term Plan - Act Now for a Stress-free Future

Can I Extend the Tenure of My Term Insurance Plan?

How To Change The Nominee in Term Insurance?

Buying A Term Insurance Plan? Take These Factors into Account

Does Term Insurance Cover Accidental Death?

All About Term Insurance Inbuilt Coverage

Form 16, Form 16A, and Form 16B?

While Buying Term Insurance Compare Features, Not Just Premiums

Advantages of Buying Term Insurance in Your 50s

Side Effects of Covid-19 Booster Doses

Insuring Protection Against Death With Death Insurance Rider

Is It Good To Buy A Term Insurance Plan In 2022?

जीवन बीमा पॉलिसी लेने की प्रक्रिया क्या है?

Difference Between Term Insurance and Endowment Plan

Can Senior Citizens Avail Term Insurance?

8 Types of Death not covered in Term Insurance Plan

How to Ensure That Your Term Insurance Claims Are Never Rejected?