For decades, agents pushed endowment plans and ULIPs over pure term insurance — largely because the commission is dramatically higher. Here is the honest comparison.
The core problem with endowment plans
An endowment plan "combines" insurance with savings. Sounds good — but you pay 20–40× the premium of a term plan for the same death benefit. The "savings" component typically earns 4–5% annually — less than a fixed deposit.
The "buy term, invest the rest" principle
Buy a ₹1 crore term plan for ₹12,000/year. Invest the ₹2–3 lakh/year you would have spent on an endowment in an index fund. In 20 years, you will have far more wealth AND better life cover.
The core problem with ULIPs
ULIPs are market-linked insurance products. In the early years, 10–30% of your premium goes to charges (premium allocation, mortality, fund management). Returns are also not guaranteed. They are complex products that most buyers do not fully understand.
| Feature | Term | Endowment | ULIP |
|---|---|---|---|
| Premium for ₹1Cr cover | ₹8–15k/yr | ₹2–4L/yr | ₹1–2L/yr |
| Investment returns | None | 4–5% (low) | Market-linked |
| Transparency | High | Low | Medium |
| Agent commission | Low | Very high | High |
| Recommended? | ✅ Yes | ❌ No | ❌ Usually not |
What about the "wasted premium" objection?
Many people feel uncomfortable paying premiums that expire. This is emotional reasoning. Car insurance, health insurance — none of these pay back your premium if you do not claim. Term insurance is the same: you are buying peace of mind and financial protection, not an investment.
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