Term insurance: protection, not a savings plan.
One of these three products protects your family. The other two mostly protect the agent.
Meera's father had an endowment policy. His family got far less than they needed.
Meera's father paid his insurance premium every year without fail. When he died, the agent came to help with the claim. The family received their payout — and discovered it barely covered the outstanding home loan. The policy said 'insurance'. But it had always been something else.
Insurance has exactly one job. Replace lost income when the earner dies. A large payout gives the family time to recover — enough to clear a home loan and fund a child's education.
Term insurance does this job cleanly. You pay a small annual premium. If you die during the policy period, your family gets the full sum assured. If you live, the premium is spent — like car insurance. No maturity payout. No 'return of premium'.
Endowment and ULIP add a savings layer. They promise to return money at maturity. That sounds efficient. But mixing insurance and savings in one product tends to do both poorly — too little cover for too much premium.
The cost gap tells the story. A ₹1 crore term cover for a 30-year-old costs about ₹8,000–10,000 a year online. An endowment plan for the same sum assured costs ₹50,000 or more per year. That gap between premiums is your 'savings' — typically earning 4–5.5% per year. One more fact: an agent earns up to 35% of your first-year endowment premium in commission. That tells you most of what you need to know.
What actually reaches the locker
A kirana owner counts the register at day's end. Everything in it looks like income. But real profit — what goes into the safe — is what remains after rent, salaries, and restocking the fridge. The fridge came from the register but never reached the locker. An endowment policy works the same way. The premium you pay looks like saving. Subtract the insurer's margin, the agent's commission, and the return drag of 4–5% a year. What's left in your financial locker is far smaller than the premium total suggests.
Why this matters
If you have dependants — a spouse, children, ageing parents — your biggest financial risk is dying too early. A ₹1 crore term policy costs less than a family dinner out each month. It gives them a real safety net. Mixing insurance with savings sounds efficient. But it usually means you under-insure because premiums are high, and under-save because returns are low. Buy adequate protection first. Then invest the rest where it can actually grow.
Enter your endowment details. See what it actually earns.
Enter your endowment premium, the policy term, and the maturity amount your agent promised. The calculator shows your actual annual return — and what the same money grows to if invested differently.
What does your endowment actually earn?
Over 20 years you put in 1200000 and get ₹15 lakh back — an approximate annual return of 1.1%. A plain FD today pays 6–7%. The same ₹5,000/month split into a ₹1 Cr term plan (≈₹667/month) and an index fund grows to ₹33 lakh, which is 1817764.71 more. Term plan cost fixed at ₹667/month; index fund return assumed at 10% p.a. — illustrative only, actual returns vary and are not guaranteed.
Protection first. Savings separate. Never mixed.
Where people go wrong
- Buying endowment to 'get money back'The maturity payout sounds large. But the IRR is typically 4–5.5% — often below FD rates and well below inflation over 20 years.
- Never calculating IRR — only seeing the maturity numberA big maturity number looks impressive until you apply the Rule of 72. At 5%, money doubles every 14.4 years. That is what your premium is actually earning.
- Surrendering the term policy because nothing came backTerm insurance is not a savings vehicle. Ending the policy without a claim means you were fortunate enough to survive it. That is exactly what the policy was for.
- Buying less cover than needed because endowment premiums are too highHigh premiums for a bundled product force a choice between adequate cover and adequate investment. Both goals suffer.
A ₹1 crore term plan costs about ₹8,000–10,000 a year — less than one family dinner out each month.
Endowment plans typically earn 4–5.5% a year. At 5%, money doubles only every 14.4 years.
Buy term, invest the rest. ₹4,000 a month at 12% for 25 years grows to ₹76 lakh.
Endowment's maturity payout triggers the 'I got something back' feeling. Paying term premiums and receiving nothing at maturity feels like a waste — even though ending the policy without a claim was the entire point.