Term Plan vs Endowment Plan vs ULIPs
This is one of the oldest plans in the insurance industry. Term Plans only offer death benefits and no maturity benefits. If the policy expires and the insuree is still alive, then no benefits would be received by him/her. This plan is used for providing pure financial protection to the family members of the policyholder. Premiums demanded in term plans are generally lesser than endowment plans or ULIP-linked plans.
Just like a term plan, endowment plans offer a death benefit. But unlike term plans, these plans also offer some maturity benefits if the person insured is alive after the expiry date of the policy. These plans do not offer any investment portfolio but guarantee returns to the insured person or his family. The premium that is to be paid to the company is higher than what is paid in a term plan. A person can avail loans against his/her endowment plan. So, an endowment plan offers both ‘life + investment’ protection.
Unit linked Insurance plans or ULIPs are a combination of insurance + investment. It is a perfect example of a hybrid model that offers both, life protection and the option to earn money via a good investment strategy. An individual insured under this policy will pay the premium which will be bifurcated into two parts.
One part of the premium is set aside for the insured person’s life insurance, while the other part is invested in the stock market. ULIPs are very flexible because it allows you to alter the proportional allocation of your investment and life insurance as per your wish.