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Difference Between Term Plan and Endowment Plan

If you’ve made the wise decision to invest in a life insurance plan and safeguarded the future of your family, the next step to focus on is choosing the kind of life insurance you wish to purchase. Should you opt for term insurance? Or is it a better idea to purchase life insurance which also gives a maturity benefit? To resolve the term insurance vs. traditional endowment insurance dilemma, it’s important to first address fundamental questions like "What is term insurance?" and "What is traditional endowment insurance?" Let’s get to the basics of these two types of life covers and understand more about their features and advantages.

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry, with a strong understanding of the insurance sector.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 12th July 2025
Modified on: 14th July 2025
Reading Time: 15 Mins
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What is term insurance?

So, if you haven’t chosen between these two types of life covers yet, you’re perhaps wondering: What is term insurance? Simply put, a term plan is a kind of life insurance policy that is valid for a specific term or period. In case the insured person dies during this term, the insurer pays death benefit to the life assured’s beneficiary. Since term insurance benefits generally do not include any maturity pay-outs, insured people do not receive any gains from a term plan upon surviving the policy duration.

Say, for instance, that you purchase a term insurance plan with a policy duration of 20 years. If you die during this 20-year window, your insurer pays out the sum assured under the plan as death benefit to your nominee. On the other hand, if you survive the policy duration of 20 years, you receive no maturity benefits.

 

What is traditional endowment insurance?

Traditional endowment insurance builds up on the concept of term insurance. In essence, a traditional endowment insurance policy provides insured persons with both deaths benefit as well as maturity benefit. Some traditional endowment insurance plans also offer whole life coverage, so the policyholder can remain insured right up to the age of 99. If the insured person dies when the policy is active, the nominee receives death benefit and bonuses, if any, depending on type of plan chosen and the policy terms and conditions. Alternatively, if the insured person outlives the policy duration, maturity benefits are paid out to the insured.

For instance, say you invest in a traditional endowment insurance plan that offers you protection till you reach the age of 65. Now, if you die before the policy expires, say at the age of 62, the insurance company pays out death benefits under the plan to your nominee. Depending up on the plan opted for, your nominee may also receive any bonuses due as per the plan’s terms and conditions. In case you survive past the age of 65, your life cover expires, and the insurance company pays out maturity benefit under the traditional endowment insurance plan.

 

What is the difference between term insurance and traditional endowment insurance?

Choosing between term insurance and an endowment plan depends on your financial goals—whether you want pure protection or a mix of protection and savings. The table below outlines the key differences between these two types of life insurance plans to help you decide which suits your needs better.

 

Metrics

Term Insurance

Endowment Insurance

Type of Plan

A pure life insurance policy offering financial protection to your family in case of your untimely demise.

A life insurance plan that combines protection with savings and offers a maturity benefit if you survive the policy term.

Coverage


Offers extensive life cover with a sum assured payable only if the life assured passes away during the policy term.

Offers life cover plus savings. The sum assured is paid either on death or at maturity, depending on the life assured’s survival.

Premium


Has low premiums and high coverage, making it suitable for pure risk protection.

Premiums are comparatively higher due to the savings component included in the plan.

Sum Assured

The sum assured is purely meant for financial protection in case of death

The sum assured combines life cover with savings, and is designed to provide a maturity benefit if the insured survives the term

Suitable For


Best suited for individuals seeking cost-effective coverage to protect their family’s financial future.

Suitable for those looking for dual benefits—life cover plus long-term financial discipline through savings.

Payout Options

Provides flexible payout—lump sum, regular monthly income, or a combination depending on the nominee’s preference.

Payout is generally offered as a lump sum, either on death or on policy maturity.


Maturity Benefits

No maturity benefits for standard term plans. Return of premium plans refund premiums if the life assured survives.

Offers guaranteed* maturity benefits if the life assured r outlives the policy term.

Liquidity


No liquidity. Funds are paid out only in the event of death.

Allows withdrawals or loans against the policy in case of financial emergencies subject to policy terms and conditions.

 

Both plans serve different financial needs. If you want affordable protection, term insurance is ideal. If you prefer saving while being insured, an endowment policy may suit you better. Always compare plans, premiums, and benefits before making a decision.

 

  • The premium charged

    In the term insurance vs. traditional insurance difference, term insurance appears to have the upper hand. The premium charged for term insurance policies is typically much lower than the premium underwritten for traditional endowment insurance plans. This is primarily because term insurance benefits offer pure protection, meaning that term plans only offer you a life cover without any maturity benefit.

    As a result, the premium charged for term insurance is lower when compared with the premium for traditional endowment insurance plans. If you opt for an online term plan, your premium rates could be even lower, since there’s no agent/intermediary commission involved.


  • The element of savings

    In this aspect, traditional endowment insurance plans appear to fare better. That’s because traditional endowment insurance plans offer both death benefit as well as maturity benefit. So, if you survive the policy duration, you still receive monetary gains from the plan. The maturity benefit paid out under traditional endowment insurance plans also may include bonuses, if any depending up on the type of plan opted for and the policy terms and conditions.

    Term insurance, on the other hand, does not have any savings component. Since the scope of term insurance benefits only includes death benefit, you receive no pay-out if you outlive your term insurance policy.

 

How to Choose Between Term Insurance and Endowment Plan?

Choosing between a term insurance plan and an endowment policy depends on your financial priorities. While term plans offer pure life cover, endowment plans combine insurance with savings. To make an informed decision, assess key factors such as your financial goals, expense outlook, affordability, and long-term aspirations.

 

  1. Financial Objective

    Start by identifying your primary financial purpose. If your main concern is protecting your family's financial future at an affordable cost, a term insurance plan may be ideal. However, if you seek a dual benefit—life cover and disciplined savings for future goals like education or retirement—an endowment plan could work better. Understanding whether you need protection, savings, or both will guide your decision.


  2. Current & Future Expenses

    Your ongoing lifestyle and expected financial responsibilities play a crucial role in choosing between the two. If your monthly expenses leave little room for savings, a low-cost term insurance plan ensures life cover without burdening your budget. On the other hand, if you anticipate significant future expenses—such as a child’s education or home purchase—an endowment plan can help you build a financial cushion over time.


  3. Affordability

    Affordability is key when selecting the right plan. Term insurance plans offer higher coverage at lower premiums, making them suitable for individuals with limited budgets. Endowment plans come with higher premiums due to their savings component. Consider your current income, future financial commitments, and ability to sustain regular premiums before deciding.


  4. Life Goals

    Your life goals—whether short-term or long-term—should influence your insurance choice. For those focused on wealth creation and achieving milestones like retirement planning or buying a home, an endowment plan offers maturity benefits aligned with those goals. If your priority is to ensure financial protection for your family in your absence, a term plan can be a suitable option .

 

Which one should you choose, and why?

Now that the details of term insurance and traditional endowment insurance have been etched out clearly, you’ll find it easier to make an informed choice between these two types of life covers. Essentially, if you prefer a low-premium plan that only offers a life cover, a term insurance plan would be the preferred choice for you. On the other hand, if you’re looking for a plan that provides a life cover and also simultaneously helps you save for your retirement or for your long-term goals, a traditional endowment insurance policy fits the bill better.

The good news is that irrespective of which kind of life cover you choose, the premium you pay annually is eligible to be deducted from your total taxable income, as per section 80C of the Income Tax Act, 1961. The death benefit and maturity benefit received from either kind of plan are also tax-free, according to section 10(10D) of the Income Tax Act, 1961, subject to provisions therein, as amended from time to time So, compare the areas of differences and make a choice that fits perfectly into your financial plan.

 

Conclusion

Choosing between a term insurance plan and an endowment plan is a vital step in securing your financial future. Both plans offer benefits such as—term plans focus on pure protection, while endowment plans combine savings with life cover. The right choice depends on your financial goals, budget, and long-term expectations. Carefully evaluate your priorities, compare plan features, and seek expert advice to make an informed decision that aligns with your family’s needs and future aspirations.

 

FAQs

Which is Better: Term Plan or Endowment Plan?

The choice between a term plan and an endowment plan depends on your financial goals. If you want affordable, high-coverage life protection, a term plan can be suitable . If you want life cover plus disciplined savings for future goals, an endowment plan may suit you better. Evaluate your budget, long-term plans, and risk appetite before choosing. For pure protection, opt for a term plan. For combined insurance and savings, an endowment plan could be more appropriate.

 

Is an Endowment Plan a Good Investment?

An endowment plan can be a good investment if your goal is to build savings systematically while securing life insurance coverage. These plans offer guaranteed* returns on maturity and serve as a low-risk, disciplined way to accumulate wealth over time.

 

Do I Get Maturity as well as Death Benefit with an Endowment Plan?

Yes, endowment plans offer both maturity and death benefits. If the life assured survives the policy term, they receive the maturity benefit—a lump sum payout. In the unfortunate event of the life assured’s death during the term, the nominee receives the death benefit. This dual feature makes endowment plans suitable for those who want both protection and savings, helping meet future financial goals while ensuring security for their loved ones.

 

How Much Life Cover Should I Choose with Term Insurance?

The ideal life cover in a term insurance plan should be 15 to 20 times your annual income. It should also account for current liabilities, future expenses (like education or marriage), and inflation. Your age, lifestyle, number of dependents, and financial responsibilities play a key role in determining the right coverage. A well-chosen sum assured ensures your family maintains their standard of living in your absence without financial stress.

 

Are There Any Riders Available with Endowment Plans?

Yes, endowment plans come with optional riders that enhance the overall coverage. Common riders include accidental death benefit, critical illness cover, waiver of premium. These riders offer extra protection at a nominal additional cost. Adding suitable riders helps ensure financial support during unforeseen life events, making your endowment policy more comprehensive and secure.

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*Above illustration is for Bajaj Allianz Life eTouch II - A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN:116N198V01) considering Male aged 25years | Non-Smoker | Policy Term(PT)– 30 years | Premium Payment Term (PPT)– 30 years | Sum Assured opted is Rs.1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 5,092. 2nd Year onwards premium Rs. 5,520. Total Premium Rs. 1,65,172 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage: 40, Income Payout Percentage: 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

##Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency on first year's premium.

$Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz Life Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy     

*Conditions Apply – The Guaranteed benefits are dependent on policy term, premium payment term availed along with other variable factors. For more details please refer to sales brochure.

BJAZ-WEB-EC-16013/25

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

Please refer to BALIC Privacy Policy

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Disclaimer

%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


X
Disclaimer

*Above illustration is for Bajaj Allianz Life eTouch II - A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN:116N198V01) considering Male aged 25years | Non-Smoker | Policy Term(PT)– 30 years | Premium Payment Term (PPT)– 30 years | Sum Assured opted is Rs.1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 5,092. 2nd Year onwards premium Rs. 5,520. Total Premium Rs. 1,65,172 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage: 40, Income Payout Percentage: 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

##Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency on first year's premium.

$Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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