Term insurance vs endowment plan: Which benefits you more?

Term insurance vs endowment plan: Which benefits you more?

Khushboo Gala
Here's why term insurance always scores over endowment plans.

Term insurance, as the name itself explains, is for a specific period of time, and has the lowest possible premium among all the other insurance plans available. You can select the length of the term for which you want the coverage right from one year up to 35 years.

Premiums of this policy are fixed and it does not increase during the term period of your policy. In case of sudden death, your dependents receive the cover amount that is mentioned in the term life insurance agreement signed by you at the time you got yourself insured.

In case the individual assured survives the term of policy, no claim is paid to the assured.

Endowment insurance is another type of life insurance policy.

An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on death of the insured.

The author is the founder of Rupeeinvest.com and has written Investment Planning: Turn Your Money Into Wealth. This book covers the details of investment avenues like shares, mutual funds, bonds, bank deposits, pension schemes, real estate, commodities, tax saving schemes, etc whose knowledge is essential for everyone to make our money grow and secure our financial future. This book also covers details about Insurance Planning, Retirement Planning and Children's Future Planning

Endowment plans are useful when you retire. By buying an annuity policy with the sum received, it generates a monthly pension for the rest of a retired individual's life.

Endowment policy can be cashed in early (or surrendered) and the holder then receives the surrender value, which is determined by the insurance company depending on how long the policy has been running and how much has been paid into it.

As per the author people in India have lots of misconception about life insurance. Many people buy life insurance for saving, investment and tax saving purposes. This however is not the right approach.

The primary purpose of an insurance policy is to provide financial protection against uncertainties like loss of life and not to act as a pure investment avenue.

This can be explained further with illustrations that compare term insurance with endowment plan.

Scenario 1: You buy LIC Jeevan Mitra Endowment policy with following specifications

Age of the policyholder: 25 years
Term of plan: 15 years
Annual premium: Rs 69,829
Sum assured: Rs 10,00,000
Total premium paid over a period of 15 years: Rs 10,47,435
Amount you will get if you outlive the policy term after 15 years: Rs 16,00,000 (this includes sum assured of 10 lakh and an annual bonus of Rs 40,000 per year for 15 years)

Scenario 2: You buy LIC Anmol Jeevan Term policy with following specifications

Age of the policyholder: 25 years
Term of plan: 15 years
Annual premium: Rs 2,356
Sum assured: Rs 10,00,000
Total premium paid over a period of 15 years: Rs 35,340
Now instead of buying endowment policy you can pay a premium of Rs 2,356 per year and buy a term insurance of the same um assured and invest the remaining Rs 67,473 (Rs 69,829 minus Rs 2,356) in secure and guaranteed return product like PPF (Public Provident Fund) every year.

In that scenario if you die before the tenure of the policy, that is, 15 years your nominee will get the sum assured of Rs 10,00,000 from term policy plus the amount you had invested in other investment avenues like PPF.

If you remain alive after 15 years, in that case you get nothing from your term insurance policy but the amount you will get from the safe PPF after 15 years will be over Rs 20,00,000 which is more than 16,00,000 in case of endowment policy.

Note: Figures mentioned above are based on certain assumptions. Actual figures may change.

What it tells you is that mixing insurance and investment is not a wise thing to do.

You can do much better by separating the two as shown in the example above. Of course no insurance agent will advise you to do this since it's a question of their livelihoods. You have to ask hard questions and do your own analysis.

Kamal Vs Rajini: Who is The Best?

 Rajinikanth doesn’t wear a watch. He decides what time it is, and his calendar goes straight from March 31 to April 2—because NOBODY can fool Rajinikanth.


Ever come across lines like these? Well sure, some of them are said to be inspired by Chuck Norris jokes, but well, if you don’t like them, you’d better run when you have the chance; because Rajinikanth is watching. Mind it.


Movies, first introduced as a means of recreation, have evolved over time and have gained the power to inspire, and ignite the soul, as with any other form of art. India especially stands witness to this fact, with its actors having a cult status, and devotees who are determinedly loyal to their favorite stars.


Actors like Rajinikanth and Kamal Haasan especially are privy to this kind of god-like-status with the masses; and one question that continues to plague South India is that of who is better at the trade—the iconic Kamal Haasan or idolized Rajinikanth?

1. If you played by numbers, Rajinikanth is older than Kamal, but entered the film industry later than the latter. The ‘Superstar’ of Tamil cinema made more than a whopping 150 films since 1975, while Kamal Haasan had his first performance when he was just four years old, and since 1959, he has acted in over 300 movies.

2. And if you went by popularity, there are reports that Rajini has over 63000 fan clubs worldwide for his acting style, with admirers even in Japan after his movie “Muthu” got dubbed to Japanese. Muthu's success in Japan led Newsweek, an American news magazine to comment in 1999 that Rajinikanth had “supplanted Leonardo DiCaprio as Japan's trendiest heartthrob.” The Superstar has received six Tamil Nadu State Film Awards for the Best Actor , and one Filmfare award for the movie ‘Nallavanukku Nallavan’.

But where Rajini scores in style, Kamal Haasan makes up with acting performance. He is measured as one of the leading method actors of Indian cinema, and is known for having starred in the largest number of films submitted by India for the Oscars (i.e. Academy Awards) for the Best Foreign Language Film category.

  

3. "Well what about the movies they starred in?", you ask.
Well Rajini’s latest film released, Enthiran (‘Robot’ in Hindi) was the most expensive Indian film ever made as of 2010, and ultimately went on to become the highest-grossing film in India of its time. Enthiran also made it to the top 50 on IMDB’s (Internet Movie Database) list of top-205 films of the world in 2010, and is the only Tamil film to be featured on this list. Few memorable hits of the Superstar of the South include ‘Badsha’, ‘Billa’, and ‘Padaiyappa’ among a long list.


And on the same note, Kamal Haasan’s Dasavathaaram, (a movie in which he portrayed 10 different roles), is known to be one of the first modern sci-fi films made in India that the actor co-wrote along with the film's director (K. S. Ravikumar). It also remains one of the most expensive Indian films ever made. The film became the first highest grossing film ever in Tamil cinema as of 2008, and won him critical acclaim for his performance. The film was distributed by Walt Disney Pictures in Canada, the first Tamil film to have been distributed by the company. It ultimately grossed more than 2 billion worldwide. Kamal’s other hits include ‘Nayagan’, (a movie that saw him earning his third Indian National Award and was listed in TIME Magazine’s “All TIME-100 movies” list), ‘Moondram Pirai’ (‘Sadhma’ in Hindi), and ‘Thevar Magan’ (‘Virasat’ in Hindi).

4. Both stars have been actively involved in helping the society through charitable acts, and donations, and helped pay back their distributors in case their films didn’t do well at the box office.


So the question remains—who is the best? Nobody, not even Google knows (we haven’t tried asking Rajini yet).