Keywords: Ulip vs endowment plan, the difference between ulip and endowment plan
There is no denying that life is uncertain, and one cannot plan for all circumstances, but you can sleep in peace knowing that you have financially secured your loved ones’ lives for unforeseen situations. Choosing the right insurance plan determines the care and financial support your family gets in case of any unfortunate event. Of course, one has to consider the factors like the sum assured, premiums, tenure of the policy, the risk involved, etc., before purchasing an insurance cover.
In this article, we will help you understand what are endowment plan and ULIP plans along with the difference between the two. Keep scrolling, while we discuss the difference so you can make the right buying decision to align with your requirements.
What is an Endowment Plan?
An endowment plan is a kind of insurance policy that provides financial security to your family. A lump sum is paid to you on maturity or to the beneficiary in case of the policyholder’s unfortunate demise.
One of the main benefits of the endowment plan is that it provides you with a risk-free savings corpus and a financial pool at its maturity. So, you can also secure your post-retirement life with these savings.
Benefits of Endowment plan
1.An endowment plan is a flexible savings policy that lets you pay your premiums in one go or after regular intervals according to your convenience.
2.The tax-aware investors always choose this policy since one can deduct the premium amount and avail the tax credit on the maturity under Sections 80C and Section 10 10D of the Income Tax Act.
3.The returns you get are much higher than conventional policies as the endowment plan gives compounded returns.
4.An endowment plan is a low-risk investment and provides life insurance cover, offering dual benefits.
Unit Linked Insurance Policy or ULIP is the right fit for you if you want to create wealth and financial security opportunities. A part of the premiums paid for ULIPs contributes to the life cover while the rest is invested in debt, equity and money-market instruments. The investment can be made in different ULIP funds such as equity, debt, or a combination of both, called the Balanced Funds. In addition, you can customize your ULIP by adding extra benefits through riders such as Unit Linked accident and disability benefit rider.
1. Most ULIPs offer you the flexibility to change your life cover, premium amount, or fund option. For example, you can increase the sum assured amount according to your requirements at different stages of life, such as higher education, marriage, childhood, etc. In addition, you can maximize the returns from your investment by adding a top-up amount to your existing premium.
2.You can make your plan more efficient by purchasing riders. For example, if the policyholder has a critical disease, the critical illness benefit rider can be a source of lost income and protect your loved ones.
3. ULIPs provide transparency to the customers through daily NAV updates. Net Asset Value or NAV can help you understand the performance of your funds..
4.The free-look period feature of ULIPs lets you try the plan for 15 days. After that, you can continue the policy if satisfied with the benefits and conditions. If you are dissatisfied with the plan, the premium amount is paid back to you.
ULIP vs Endowment Plan
Here is a comparison of the main aspects of these policies to make you understand the difference between ULIP and endowment plan.
Benefits
An endowment plan provides you with the maturity benefit or death benefit of the sum assured along with the bonus (if any). ULIP is a blend of insurance plans and investment tools. Along with the insurance cover, it allows you to create more wealth.
Risk Involved
An endowment plan is a low-risk insurance plan, while the risk involved in ULIPs is comparatively higher. This is because the performance of funds in ULIPs entirely depends upon the market.
Returns
Returns in the endowment policy are the guaranteed sum assured and the bonuses depending upon the type of endowment plan you opt for. On the other hand, returns are much higher in ULIPs as it puts your money to work in the financial market.
Withdrawals
Partial withdrawal is not allowed in an endowment plan. However, ULIP allows you partial withdrawal at any point in time during the policy.
You can choose the right option depending on your budget, risk-taking appetite, financial goals, the premiums required, returns, flexibility, and the policy’s tenure. For example, endowment plans provide guaranteed returns with low risk involved, while ULIPs offer higher returns with advantages such as partial withdrawal, transparency, flexibility, etc.
