Endowment vs Whole Life Insurance - Key Differences

An endowment policy provides a lump sum after a specific term or upon the policyholder's death. It is usually ideal for those seeking savings and protection. Whole life insurance, on the other hand, offers lifelong coverage and helps secure your family’s future. 

Knowing these differences can help make an informed decision based on personal financial goals and needs.

What is Whole Life Insurance?

Before diving into the differences between whole-life policy and endowment policy, let’s find out what whole-life policies are. 

A whole life insurance plan offers a life cover until the death of the life assured or till they turn 99. Under a whole life plan, you, as the policyholder, pay a premium — usually every month. The premium is directed towards insurance and low-risk investments. 

The low-risk investment part helps in building a cash value. In case you pass away, the eligible beneficiary receives a payout as a death benefit. 

Features and Benefits of Whole Life Insurance

Mentioned below are the major features and benefits of a whole life plan —

• Whole Life Cover – A whole life policy covers the life assured’s whole life. It offers an assured death benefit to the beneficiary in case the insured passes away during the policy tenure. 
• Financial Safety Net – A whole life insurance policy minimises the financial risks that the life assured’s family faces if the former passes away during the policy tenure. The insurance company offers the guaranteed sum assured along with applicable bonuses in such a situation. This keeps the family financially secure even in the life assured’s absence. 
• Loan Facility – The life assured can take out a loan against the whole life insurance plan. However, usually, the policyholder needs to complete at least 3 policy years and ensure that all the premiums are fully paid. 

What is Endowment Life Insurance?

An endowment life policy is a type of life insurance that financially covers the life assured’s family in case the former passes away, helping you save money over time. 

An endowment life insurance plan usually consists of life cover and savings components. The amount saved is called the maturity amount and is paid to the life assured in case they survive the policy tenure during the policy tenure. 

However, if the life assured passes away, the beneficiary receives a death benefit. The funds received can be used to achieve long-term goals like children’s higher education or planning their marriage.

Features and Benefits of an Endowment Life Insurance Plan

Here are the key features and benefits of an endowment life insurance policy —

• Death/Survival Benefits – An endowment life policy helps you build future savings while providing financial protection for your family. The payout for both survival and death benefits is higher compared to term plans.
• Higher Returns – It allows you to save more. If the insured passes away, the beneficiary receives the sum assured along with bonuses. If the insured survives the policy term, they receive the same.
• Low-Risk Investment – Unlike mutual funds and ULIPs, endowment policies carry lower risk as funds aren’t invested directly in the stock market.
• Flexible Coverage – Additional coverage (riders) for critical illnesses, disability, or accidental death can be added to the base plan for extra protection.
• Maturity Benefit – Once the policy term ends, the policyholder receives the sum assured along with bonuses.

Having understood the 2 types of life insurance policies in detail, let us understand the differences between the two. 

Difference Between Endowment Policy and Whole Life Policy

In the table below, we have defined the major points of difference between whole life policy and endowment policy for your reference —

Whole Life Policy vs Endowment Policy: Which is Better?

Life insurance provides financial support to your loved ones in case of your passing. When deciding between endowment and whole life insurance, consider factors like your financial situation, number of dependents, age, and health. 

Furthermore, each insurance provider offers various benefits with specific terms. Thus, it’s important to compare policies to find the best plan for your needs.