Endowment vs Term + MF

Compare endowment plan returns vs buying term insurance and investing the premium difference. See which builds more wealth over 20 years.

Endowment vs Term Insurance Calculator

IRR of your endowment plan vs buying term and investing the difference

Annual endowment premium Rs 50,000
Rs 10KRs 5L
Rs
Maturity amount promised Rs 12L
Rs 1LRs 2Cr
Rs
Term policy annual premium Rs 8,000

What you'd pay for same life cover under a pure term plan

Rs 2KRs 50K
Rs
Investment return if invested instead 12%
6%20%
%
Policy term 20 years
10 yr30 yr
yrs
Term + Invest corpus
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at maturity
Endowment maturity
---
promised amount
Endowment IRR
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effective return
Annual endowment premium---
Total premium paid---
Endowment maturity---
Endowment effective IRR---
Term premium---
Annual MF investment---
Term + Invest corpus---
Extra wealth with term + invest---
Corpus comparison at maturity
Term + Invest: ---
Endowment: ---

IRR calculation is approximate. Endowment bonuses (reversionary/terminal) vary. Always get a benefit illustration from the insurer and compute IRR before buying.

Wealth growth — endowment vs term + invest
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ThriftRupee Insight

Endowment plans from LIC and private insurers deliver 4–5.5% effective returns — barely above inflation, well below FD rates. A Rs 50,000/year endowment giving Rs 12 lakh at maturity in 20 years sounds good until you compare it to Rs 5,000/year for the same Rs 10 lakh term cover + Rs 45,000/year in a PPF/ELSS — which compounds to Rs 52+ lakh. The "money back" comfort of endowment is extremely expensive.

Endowment vs Term Insurance — The Real Return Comparison

Endowment plans appear attractive because they return money at maturity. But the Internal Rate of Return (IRR) of most traditional endowment plans is only 4–5.5% — below even FD rates. This calculator computes your endowment's actual IRR and compares it against the wealth you would have built by buying a cheaper term plan and investing the premium difference in a market-linked instrument.

Frequently asked questions

What is an endowment insurance plan?▼
An endowment plan is a life insurance policy that combines protection with savings. If you die during the policy term, the sum assured is paid. If you survive, you receive the maturity amount (sum assured + bonuses). The premiums are significantly higher than term insurance for the same cover, reflecting the savings component which earns 4–5.5% IRR.
Should I surrender my endowment policy?▼
If you are in the early years (first 5) the surrender value is very low or zero. After 5 years, calculate the IRR of continuing vs surrendering and reinvesting. If remaining years give less than 6% IRR, surrender and reinvest — but account for lost tax benefits and any bonus forfeiture. Never surrender just before maturity.
Are endowment plan maturity proceeds taxable?▼
Under Section 10(10D), life insurance maturity proceeds are tax-free if annual premium ≤ 10% of sum assured (for policies issued after April 1, 2012). For policies where premium exceeds 10% of sum assured, maturity is taxable as "income from other sources." Most traditional endowment plans qualify for tax-free maturity.

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