Term insurance vs endowment/ULIP — what should you buy?

The core confusion is that endowment plans and ULIPs bundle two things that are better kept apart: protecting your family if you die, and growing your money. A term plan does only the first job — it pays a large sum to your family if you die during the policy term, and nothing if you survive. Because it's pure protection with no savings attached, it is astonishingly cheap: a healthy 30-year-old can often cover ₹1 crore for a premium that costs less than a monthly dinner out.

Endowment plans and ULIPs cost many times more for the same cover, because most of your premium is quietly going into a savings or investment pot rather than protection. That sounds appealing until you see the result: the life cover they offer is usually small relative to the premium, and the returns on the savings portion are typically modest — often in the 4–6% range for traditional endowment plans, well below what simple long-term investments have delivered. Work out how much cover your family actually needs with the term insurance calculator.

The standard advice from most independent planners is blunt: buy term, invest the rest. Take a large term cover for protection, then invest the money you save on premiums separately, where you can see exactly what it earns and withdraw it freely. For the investing half, tax-saving options like ELSS funds or the safer PPF keep the money working for you without wrapping it inside an insurance policy you can't easily exit.

When does a bundled plan make sense? Rarely, but not never — some people genuinely won't invest on their own, and a forced-savings endowment is better than not saving at all. And ULIPs have their own tax rules worth checking. But go in with eyes open: you are usually paying for the discipline, not the returns. For most families with dependents, the cheapest way to protect them properly is a big term cover, and the money left over does more good invested where you control it.