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Endowment Plans Or ULIPs? Which Is A Better Option?

Endowment policies combine the benefit of life insurance and investment tools, these plans provide a death benefit in case of an unforeseen demise of the life assured during the policy tenure and a maturity at the end of the policy term in case the life assured survives the entire policy term. Unit-linked insurance policy also combines the benefit of life insurance and investment tools by investing part of your premiums paid towards a market linked investment tool. ULIPs have a certain amount of risk involved, on the other hand endowment plans are risk free. 

Difference Between an Endowment and ULIP Plans

Below mentioned is the difference between an endowment and ULIP plan:

Basis 

Endowment Plan

Unit-Linked Insurance Plan

What Is It?

Endowment policies are a blend of savings and life cover. This policy provides a death benefit in case of an untimely demise of the life assured during the policy term and a maturity benefit in case the life assured survives the entire policy tenure. Endowment plans provide the benefit of wealth appreciation by declaring a yearly bonus on the policy, which shall be provided with the death benefit/maturity benefit.

Unit-linked insurance plans provide the advantage of life cover and wealth creation. In ULIPs, the premiums you pay are partly invested in different investment tools and partly on the risk cover. You can choose the investment tool as per your risk appetite and investment horizon. ULIPs are a rather risky type of investment as part of the premiums paid are investment in market linked investment tools. 

Maturity Benefit

Death Benefit/Sum Assured + Bonus accumulated till the date of plan maturity.

Units redeemed at prevailing rates at maturity.

Returns

Returns are low as compared to ULIPs

Returns are higher as compared to Endowment plans. 

Risk

No risk involved 

High risk involved

Premium

Premiums for an endowment plan are higher as compared to other types of life insurance plans.

ULIPs have high premium rates as compared to endowment plans. 

Transparency

No transparency as there is no option to track.

Complete transparency under ULIPs as you can keep a track of investment portfolio.

Flexibility

There is no flexibility under endowment plans.

Under ULIPs you get the flexibility to switch funds and change the investment strategy. 

Endowment Plans Or ULIPs? Which Is A Better Option?

It is safe to say that endowment plans are a less risky investment option which provide financial security to the family of the life assured in case of an unforeseen demise of the life assured during the coverage period. Although ULIPs let a person invest part of your premiums paid into different market linked investment options, this makes them a risky investment option. Endowment plans allow wealth appreciation by declaring a yearly bonus on the policy. 

Also read - How An Endowment Plans Can Help In Retirement Planning?

Which Is Better Term Insurance or Endowment Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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