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Introduction

At a time when our primary focus remains income growth, many of us forget to find the right balance between risk and stability. However, the Unit Linked Insurance Plan is an insurance product that helps you reach this equilibrium between income stability and life goals. ULIPs bring quite a few things to the table which traditional life insurance policies like term plans and endowment plans miss out on.

A prudent mix of traditional plans and Unit Linked Insurance Plans are recommended, but it is necessary to understand the key differences between them to make well-informed decisions about your financial objectives. In this article, we will explore ULIP Vs endowment plans Vs term plans, which will further help you to take this decision.

 

To understand the difference between ULIP and endowment plans, as well as term plans, let’s first understand what these three plans are.

Unit Linked Insurance Plan (ULIPs)

ULIP is a unique investment tool that gives you the double advantage of life insurance as well as an investment. The premium paid by you towards a ULIP is further divided into two parts, one of which goes in insurance cover while the second part gets invested in the market. The investments done in ULIP is market-linked, thus the returns depend on the existing market conditions. However, flexibility is a major advantage of ULIP over other traditional investment options like a term plan or endowment plan. Based on your risk appetite, you can shuffle your investment between debt, equity or balanced funds.

Term plans

A term life insurance policy is one of the simplest and cost-effective forms of life insurance. It gives you coverage for a specific tenor of the policy term. If you have started a term life insurance, your nominee gets a death benefit as a lump sum amount or in monthly payouts in the unfortunate event of your death during the tenor. A term life insurance gives you maximum coverage at a minimum premium. However, it does not give you any maturity benefits or wealth creation opportunities.

Endowment Plans

An endowment plan also gives double benefits like ULIP. However, it is different from ULIP. In an endowment plan, you get life insurance while also saving money for your retirement, child’s education, marriage, house, etc. If you have started an endowment plan, your nominee will get the assured amount in the unfortunate case of your demise. If you survive the policy term, you get the maturity amount as well as any bonus amount accrued on the endowment plan.

Here is a look at the important difference between endowment plan vs ULIP vs Term Plan.

ULIP Vs Endowment Vs Term Plan

Feature

ULIP

Endowment plan

Term insurance

Coverage

Life Insurance + Investment

Life Insurance + Investment

Life Coverage

Returns

High

Medium

None

Trackability

Can track your portfolio

No option to track it

NA

Flexibility

Can switch between funds and change strategy of the investment

No flexibility as such

Except for add-ons, no flexibility

Premium Value

High

High

Low

Maturity Benefit

Units redeemed after prevailing rate upon maturity

Death benefit and assured sum + any bonus on maturity

Usually no maturity benefit

Risk Involved

Yes

No risk

No risk

Conclusion

In a nutshell, between the endowment vs ULIP vs term plans, a Unit Linked Insurance Plan gives the freedom to invest according to our financial needs and ability. Apart from an insurance cover for the policyholders, ULIPs provide market-beating maturity benefits. Hence, if you are someone who has long-term financial goals, ULIP can be an ideal option for you.

Bajaj Markets is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you make it happen in a few simple clicks. It provides simple and fast loan application processes, seamless, hassle-free claim settlements, no-cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

FAQs

An endowment plan is a kind of life insurance policy that gives coverage on the life of the policyholder as well as helps in saving regularly for a specific tenor. This money paid is then given at the time of maturity as a lump sum amount if the policyholder survives the policy term.

A term plan is an insurance policy that gives you coverage for a specific tenor. In the event of your unfortunate demise, the assured sum will be paid to your nominee.

No, you usually do not get your premiums back at the end of term insurance if you survive the tenor.

Yes, you get tax benefits available under Section 80C and 10D in ULIP.

Yes, you can keep track of your portfolio in ULIP.

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