Term Insurance vs Endowment Calculator

This strategy means buying a pure term insurance policy for life cover, which is far cheaper than an endowment plan for the same sum assured, and separately investing the money you save on premium (the difference between what an endowment would have cost and what term actually costs) into a mutual fund or other investment. The idea is that pure protection and investment are cheaper and more effective when kept separate rather than bundled into one product.

Term insurance provides pure protection with no maturity payout if you survive the term, so the insurer only prices in mortality risk. An endowment plan bundles the same protection with a savings/investment component, and the bulk of your premium goes toward building that guaranteed maturity value rather than the insurance cost itself. This is why a ₹1 crore term cover can cost a fraction of what a ₹1 crore endowment sum assured costs in annual premium.

Endowment maturity values vary significantly by insurer, plan, bonus rates, and policy terms, and are typically illustrated in your policy's benefit illustration document at the time of purchase. Rather than guessing or approximating a bonus rate that may not match your actual plan, entering the illustrated maturity value directly from your policy document gives a far more accurate comparison than any generic assumption this calculator could make on your behalf.

This should reflect a realistic, sustained return you would actually achieve investing the premium difference, most commonly through equity mutual funds for a long-term policy horizon. A commonly used range is 10-12% for a long-term equity-oriented approach, or a more conservative 7-8% for a debt-oriented approach if you prefer lower volatility. Using an unrealistically high return will make the term-and-invest side look better than it may actually turn out.

Often more, since the entire purpose of buying insurance is protecting your family if something happens to you during the policy term, not just building wealth. Term insurance typically provides a dramatically higher sum assured for the same premium, meaning your family's protection during the policy term is far stronger under the term-and-invest strategy, even before comparing what happens at maturity if you survive the full term.

This is the most legitimate argument in favour of endowment plans: they force a savings discipline through a mandatory premium, whereas the term-and-invest strategy only works if you genuinely invest the saved amount consistently rather than spending it. If you have a history of not following through on separate investment discipline, an endowment plan's built-in commitment mechanism may suit you better despite its lower overall returns, since a guaranteed lower amount is better than a higher amount you never actually accumulate.

A portion of the endowment maturity value, called the guaranteed sum assured, is contractually guaranteed regardless of market performance. However, most of the additional maturity value comes from bonuses (simple reversionary bonus and final additional bonus), which are declared annually by the insurer based on their investment performance and are not contractually guaranteed in advance, meaning the illustrated maturity value you enter here may not exactly match what you eventually receive.

Term insurance has no maturity payout to tax, since it pays out only on death (which is tax-free to the nominee under Section 10(10D)). Endowment maturity proceeds are also generally tax-exempt under Section 10(10D), provided the annual premium does not exceed 10% of the sum assured for policies issued after April 2012 (or 20% for earlier policies) — but returns from the 'invest the rest' side (like equity mutual funds) may attract capital gains tax on redemption, which this calculator does not factor in.

Not automatically — surrendering an existing endowment policy early usually results in a significant loss compared to what you've paid in, since surrender values are typically much lower than the premiums paid, especially in the early years of the policy. This calculator is best used before buying a new policy, to decide the right structure going forward, rather than as a reason to exit an existing long-held endowment policy without carefully evaluating the surrender value loss first.

This calculator assumes the premium difference is invested consistently every year for the full policy term and compounds at your entered expected return until maturity, which is the standard way this comparison is modeled. In practice, actual returns will vary year to year rather than compounding smoothly at a fixed rate, so the calculated corpus should be treated as an estimate around which real-world results will fluctuate, not an exact guaranteed figure.

Both term insurance premiums and endowment premiums qualify for Section 80C deduction under the old tax regime, so this specific benefit does not favour either option. If 80C tax saving is your primary goal alongside protection, comparing this calculator's wealth outcome against other 80C options like ELSS, PPF, or NPS (invested separately alongside a pure term plan) is usually more effective than relying on an endowment plan's bundled, lower-return structure to serve both purposes at once.