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Insurance today is not just a tax-saving instrument . It is an indispensable part of our financial planning thanks to its multifold advantages. Supporting your family in a medical emergency, providing financial security, safeguarding you from risk and uncertainties, and fostering financial growth, insurance allows you to live a tension-free life. Endowment plans , term plans, and Unit Linked Insurance Plans (ULIP) are the three most popular plans today. Each one of them, with its own set of advantages and restrictions, can safeguard you from different risks and uncertainties. But it has also confused the buyer community to decide which policy best fits your needs.So, let’s understand what differentiates each plan from the other.
Endowment Plan vs Term Plan vs ULIP
| Point of difference | Endowment plan | Term plan | ULIPs |
| Type | The endowment plan is a traditional life insurance plan which offers a death benefit along with maturity benefit. It can also provide coverage for accidental death and disability owing to an accident. | This is one of the oldest yet simplest and most affordable forms of life insurance. It provides coverage for a particular term period. Devised for the single purpose of providing pure financial protection to the family members of the policyholder in the event of an unfortunate death within the term period, it doesn’t provide any maturity benefit. | ULIP is a hybrid insurance policy that provides life cover to the policyholder along with an option to create wealth. Under the terms of this plan, a portion of your premium is set aside for life insurance while the other is invested in the capital market. |
| Pliability | The plan is moderately flexible. With different top-up plans, you can enhance the terms of coverage. | The plan is not at all flexible as its only aim is to provide financial protection. | This is the most flexible amongst the three, as it allows you to alter the proportion allocation as per your requirement. |
| Lock-in period | The lock-in period of the policy depends on the plan and its premium payment tenure. Generally, it hovers within 2 to 3 years. | It doesn’t have any lock-in period. | This comes with a 5-year mandatory lock-in period. |
| Transparency | Zero transparency, as there is no investment portfolio. | Zero transparency as the premium is invested in a common fund. | Extremely transparent as you can track your investment portfolio. |
| Returns | Offers guaranteed return. | No assured return except for TROP (Term Plan with Return of Premium). | Return is dependent on the market condition and the fund’s performance. |
| Premium | The premium rate is high because of its life insurance and savings feature. | As it offers only death benefit, the premium rate is generally low. | Highest amongst the three owing to its investment and insurance feature. |
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.