Insurance
Contents
Endowment Policy vs Term + Invest
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Traditional life insurance with low IRR vs cheap term cover + mutual fund. The real cost of bundled products.
Visual Comparison
Key Differences
| Feature | Endowment Policy | Term + Invest (MF) |
|---|---|---|
| Annual premium | ₹50,000–₹1 lakh for ₹10L cover | ₹8,000–₹12,000 for ₹1 crore cover |
| Investment component | Yes — low returns (4–6% IRR) | Separate mutual fund (12%+ historical) |
| Maturity value | Sum assured + bonuses | Mutual fund corpus (market-linked) |
| Lock-in | Until maturity (15–20 years) | No lock-in on mutual fund |
| Transparency | Opaque — bundled charges | Fully transparent |
When to Choose Which
Choose Endowment Policy
- You will not invest the savings otherwise
- Bonus from employer covers endowment premium
- Forced savings discipline is needed
- Short-term policyholder (surrender value considered)
Choose Term + Invest (MF)
- Financial literacy + discipline to invest separately
- Need high cover at low cost
- Want wealth creation alongside protection
- Long-term goal with maximum flexibility
Frequently Asked Questions
A life insurance policy that provides sum assured on death OR on maturity. It combines insurance with a savings element, but the investment returns are typically 4–6% IRR.
Most traditional endowment plans deliver an effective internal rate of return (IRR) of 4–6%. This is well below inflation and mutual fund returns.
Term provides 5–10× more cover at much lower premium. The savings portion of endowment underperforms mutual funds significantly.
Yes, but surrender value is typically much lower than total premiums paid, especially in the first 3 years. Surrendering early results in significant losses.
If you stop paying premiums after a certain period, the policy continues with a reduced sum assured called paid-up value.