Term or endowment? A straight answer on life insurance
Bundling protection with investment usually delivers less of both. Here is how to size cover properly and decide what to do with policies you already hold.
Indian households are, on the whole, over-insured on investment-linked policies and badly under-insured on pure protection. The two are not interchangeable.
Start with the number, not the product
Sum assured should be derived, not guessed. Add outstanding liabilities, the income your dependants would need to replace and for how long, and known future costs such as education. Subtract existing liquid assets. That figure is your gap.
Why term wins on protection
A term plan buys the largest sum assured per rupee of premium, because you are paying only for mortality risk and expenses. Endowment and ULIP products embed an investment component whose returns, after charges, rarely justify the bundling.
What to do with an existing endowment policy
Do not surrender reflexively. Compare the surrender value and future premium commitment against the paid-up value if you stop paying. For policies close to maturity, continuing is often correct. For a policy taken two years ago, making it paid up and redirecting the premium to term cover plus a fund usually is.
Disclosure is your family’s protection
Claims are contested over non-disclosure, not over the underlying condition. Declare every material fact — medical history, income, other policies, occupation and habits. An accepted policy with a loaded premium is infinitely better than a cheap policy that fails at claim.