Term, ULIP, and endowment plans – Know the difference

Term, ULIP, and endowment plans - Know the difference 1

While earning, most individuals lay their primary focus on income growth. To create an efficient financial plan, it is important to find the financial instruments that strike the balance between risk and reward. With a variety of financial instruments available out there, it’s difficult to determine which one to buy or invest in. For choosing life insurance also, there are a plethora of options. The popular ones that most people usually buy are term insurance, ULIP, and endowment plans.

Term, ULIP

What is a term plan?

Term insurance is a simple type of life insurance with no other external components attached to it. When you buy a term plan, you get a life cover for a fixed period. Since the life cover is provided for a specific tenure, term insurance provides huge cover for lower premiums when compared to other insurances. It is a cost-effective type of term insurance. There are several term insurance tax benefits you can get when you pay premiums.

What is ULIP?

Unit Linked Insurance Plan (ULIP) is a dual instrument that provides a combination of life insurance and investment. When you buy a ULIP, similar to any other life insurance, you pay premiums. However, the premiums here are partially allocated to provide you with a life cover and partially invested in funds of your choice.

What is an endowment plan?

Similar to ULIPs, the endowment plans also offers dual benefits as it has a savings component to it. Along with life insurance, you also save money aside for your long-term goals. Within the duration of your endowment plan, in case of your unfortunate demise, your nominee will receive death benefits. While surviving the policy, you will receive the maturity amount along with any bonus amount if accrued.

What is the difference between them?

Once you understand what a term plan, ULIP, and endowment plan are, it becomes easy to understand the difference between them. Here are the key factors where they are different:

Purpose of the instrument

When you buy a term plan online, you get life insurance alone. You can opt for huge coverage at a low premium. While, when you buy a ULIP or endowment plan, you also have a savings component along with the provision of life cover. This increases the cost involved in these products, since the charges to manage your funds are also involved.


For term insurance, you do not get any returns since it is purely life insurance. The returns on ULIPs depend upon how the funds you have invested in are performing. Usually, equity-based ULIPs offer high returns when compared to returns earned from endowment plans. Also, a ULIP offers the flexibility of tracking your portfolio and changing your fund allocation, making it a more flexible choice as compared to endowment plans.


The amount of premium is one of the crucial factors to consider while buying any life insurance plan. With term insurance, since it is pure life insurance that offers coverage for a fixed tenure, the premium is quite low on comparison to its counterparts. The premiums of ULIPs and endowment plans are usually high since they have dual components.


If you are looking for life insurance that offers huge coverage for low premiums, buy an online term plan. They offer one of the most cost-effective plans and there are also several term insurance tax benefits which you can opt for. For choosing coverage for a ULIP or an endowment plan, the premiums are usually high if you want sufficient coverage.

Charges associated

There are several charges associated with a ULIP, since there are admission and management charges on both ends, funds and insurance. The same goes with endowment plans since there are two components involved, and the charges are much more than a term plan. When you choose an online term plan, the charges involved are significantly lower than that of ULIP or endowment plan.

After knowing the differences above, it is important to evaluate which of these life insurance types meets your needs on an individual level. This is because there is no size fits all for life insurance. You need to choose the one that serves your purpose.

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