Term Insurance vs Endowment: The ₹20 Lakh Decision
Why term plans beat endowment for most Indians — and the rare case where endowment makes sense.
A ₹25,000 annual premium can buy you either a ₹1 crore term plan or a ₹15 lakh endowment policy. The difference over 25 years is enormous — but agents heavily push endowment because of higher commissions. Here is the math.
The Side-by-Side
| Metric | Term Plan | Endowment |
|---|---|---|
| Premium for ₹1 cr cover | ₹12-18k/yr at age 30 | ₹6 lakh+/yr (impractical) |
| What if you survive | Nothing back | Sum assured + bonus |
| IRR on premium | n/a (pure insurance) | 4-6% |
| Lock-in | None (just stop paying) | Surrender = heavy loss |
The Smart Alternative: Buy Term + Invest the Rest
Take the same ₹50,000 you would pay for endowment. Pay ₹15,000 for a ₹1 cr term plan. Invest the remaining ₹35,000/year in equity mutual funds at 12% expected return. Over 25 years, that ₹35,000/year SIP grows to roughly ₹52 lakh — vs ₹22-25 lakh from a typical endowment payout.
Compare investment outcomes: SIP Calculator → https://calculatordesk.in/sip-calculator
When Endowment Actually Makes Sense
Only if you genuinely cannot trust yourself to invest the difference, want forced savings, and value the guaranteed (though low) return. For everyone else, term + mutual fund SIP wins on every dimension.
Frequently Asked Questions
Can I surrender my endowment policy?
Yes, but you usually get back less than what you paid for the first 3-5 years. Run the surrender value against the projected maturity value — sometimes paid-up is better than surrender.
Does term insurance have any return?
Pure term plans have no maturity benefit. 'Return of Premium' term plans return your premiums tax-free but cost 60-100% more — the extra money invested at 8% beats the returned premium.
Is term insurance premium eligible for 80C?
Yes, both term and endowment premiums qualify under 80C up to ₹1.5 lakh per year (old regime only). Death benefit is tax-free under 10(10D).