What is Term Insurance?
Term insurance is pure protection. You pay a fixed premium for a set number of years (like 20 or 30). If the policyholder dies during this term, the nominee gets the full cover amount. If nothing happens, there is no payout at maturity.
Key features:
High coverage for low cost
No investment or maturity benefit
Best for maximum financial protection for your family
What is Investment-Linked Insurance?
Investment-linked policies combine protection with savings or investment.
1. Endowment Plans
What: Mix of life cover and guaranteed savings.
Outcome: If the policyholder lives till maturity, a lump sum (sum assured + bonuses) is paid.
2. Unit Linked Insurance Plans (ULIPs)
What: Mix of life cover and market-linked investments.
Outcome: A portion of your premium is put into equity/debt funds you choose; returns depend on market performance.
Key features of investment plans:
Lower coverage compared to pure term (for same premium)
Offer maturity value—even if no claim is made
Useful for disciplined savers, but costlier and more complex
Quick Comparison Table
|
Feature |
Term insurance |
Endowment/ULIP (Investment linked) |
|
Purpose |
Pure protection |
Protection + savings/investment |
|
Premium |
Lowest |
Higher |
|
Death Benefit |
Yes |
Yes |
|
Maturity Benefit |
No |
Yes |
|
Returns |
None |
Guaranteed (endowment) or market-linked (ULIP) |
|
Ideal For |
Maximum cover, low cost |
Those seeking combined savings + cover |
How to Choose
Primary goal is family’s protection?
Go for term insurance—high coverage, budget-friendly, simple.
Want to combine savings with basic life cover?
Consider endowment/ULIP, but compare returns and charges carefully.
Most experts recommend:
“Buy term insurance for full cover, invest the rest separately in PPF, mutual funds, or FDs for better transparency and flexibility.”
Conclusion
Term insurance gives peace of mind at the lowest cost. Investment-linked plans are best for disciplined investors seeking to combine basic protection and long-term savings—but weigh the alternatives, as often pure insurance plus separate investment offers better value.