Term Plan vs Endowment Plan vs ULIP: Which Investment Option Is Better?

What Is a Term Plan?

What Is an Endowment Plan?

What Is ULIP?

Factors ULIP Endowment Term Plan
Protection ULIP offers life cover plus investment options. It provides life coverage plus investment benefits. Term Plan only provides life coverage.
Returns Returns depend on market conditions and the performance of funds. Investors will receive guaranteed returns. No guarantee of return except with a Term Plan with Return of Premium (TROP).
Premium Depends upon the plan chosen. High premium rate because of life insurance and savings features. The premium rate is usually low as they offer only the death benefit.
Risks Involved ULIPs invest in various types of securities like equities, money markets and debts. Hence they are highly risky investments. Less risky and policyholders do not have the option to change their risk exposure. No risk, and the policyholder cannot change their exposure to risk.
Flexibility Policyholders can easily switch between funds and change the strategy of their investments. Policyholders do not receive any flexibility. One will get flexibility only in terms of add-ons and nothing else.
Transparency One can easily track his or her portfolio. The tracking option is not present. Non-applicable
Maturity Benefits Investors can redeem their fund units based on the prevailing NAV after the policy has matured. The nominee will receive death benefits alongside any other bonus after maturity. Typically there are no maturity benefits involved.

ULIP, endowment and term plan are all popular financial tools that can ensure financial protection for your family. However, all these three plans have pros and cons. It is up to you to choose between term plan vs endowment plan vs ULIP based on your requirements and life goals.

Before you invest, you should consider factors like your risk appetite, investment goals and the policy term.

FAQs on the Difference Between Term, ULIP and Endowment

What are the eligibility criteria for a term insurance policy? up-arrow

The eligibility criteria for a term plan are as follows:

  • Policyholders should be above 18 when taking the term plan under their name.
  • Sum assured is also a determining factor, as a term policy's main feature.

Why should one invest their money in ULIP policies? up-arrow

One should invest their money in ULIP policies for the following reasons:

  • ULIP allows policyholders to withdraw partially. 
  • Individuals can easily switch between investment funds.
  • Policyholders will also get rider options like term rider, accidental death rider and critical illness rider. These add-ons will help the policyholders to enhance their ULIP plan and receive more benefits.

Are endowment plans a good investment option? up-arrow

Endowment plans are quite beneficial as these are long-term and offer considerable returns over an extended period.

Can I keep track of my ULIP investment? up-arrow

Yes, ULIPs are transparent investment options. Hence, you can keep track of them from your ULIP portfolio.