Imagine a drawer at home with an endowment policy in it, bought in your twenties after a relative made a good case. The premium goes out every year, ₹1 lakh. Now you’re 35, married, carrying a home loan, and a colleague mentions that a term plan would protect your family far better. A fair question follows. Do you drop one, or keep paying for both? That’s worth working through.
Does The Endowment Policy Protect Your Family Enough?
Usually, the cover inside is small next to the premium. Say yours pays ₹10 lakh if you die. That’s an assumption, so the real figure sits in your policy document. With a home loan and two small children at home, ₹10 lakh disappears fast. The plan’s main job is paying a lump sum at maturity or on death, and the protection part ends up as a side feature.
How Does The Savings Side Actually Perform?
Here’s a made-up case, not any particular product. You pay ₹1 lakh at the start of every year for 20 years, ₹20 lakh in all. At maturity, the policy pays ₹28 lakh, bonuses included. Run the sums, and the return is about 3.1% a year.
Had that money grown at 6% elsewhere, which is an assumed rate and not a promise, it would have reached about ₹39 lakh. The illustration that came with your policy separates what’s guaranteed from what depends on bonuses.
What Does The Same Protection Cost As Term Cover?
For a healthy, salaried non-smoker at 35 with plain cover till 60 and no riders, ₹1 crore typically costs ₹911 to ₹1,201 a month. The middle is about ₹1,056, so ₹12,672 a year. That’s roughly 13% of the endowment premium, for ten times the assumed cover.
In short, term insurance vs life insurance comes down to this: term gives death benefits, while savings-type plans add maturity or survival benefits as well.
What Happens To Your Family In Each Setup?
Say the worst happens at 40, with ₹40 lakh still owed on the home loan. With only the endowment and its assumed ₹10 lakh payout, a quarter of the loan gets cleared, and the rest falls on your spouse, alongside school fees and the rent that wasn’t there before. With a ₹1 crore term plan beside it, the loan is gone, and about ₹70 lakh is left to run the household. The two situations look nothing alike, and the gap comes down to a premium of ₹12,672 a year.
Is Holding Both Really Overpaying?
Together, the two cost ₹1,12,672 a year. If you take home ₹1.1 lakh a month, that’s ₹9,389 of it, or about 8.5%. Whether that’s too much depends on what the endowment is for. If it was bought as a protection plan, it’s doing a small job at a high price, and the term plan has to carry the protection.
If it’s a goal fund for something specific, like a daughter’s wedding, holding it alongside term cover is a sensible split of jobs. The overpaying starts when one product is asked to do both.
What About The Years You’ve Already Paid?
Say eight years are done, which is ₹8 lakh paid in. Quitting feels like throwing that away. But those eight premiums are gone whichever way you go. What’s left to decide is whether the next twelve payments of ₹1 lakh, ₹12 lakh more, are worth making. That’s a separate question from the eight years behind you.
Should You Surrender The Endowment Policy?
Not automatically. Leaving early can mean getting back less than the premiums already paid, and the figure is in the policy terms and in a surrender quote from the insurer. Some policies let you stop paying and carry on with smaller benefits. The insurer can say whether yours does and what happens to the maturity amount.
Who Should Not Keep Both?
Picture the week when the term premium and the endowment premium fall due together. If paying both means skipping something else that matters, that’s the first sign it’s too much, and the family is under-protected if the term plan is the one that gets dropped.
A second sign is a blank look when someone asks what the endowment is for. Policies without a goal tend to get renewed out of habit. Holding both only to feel safe, without knowing what the endowment guarantees, doesn’t settle anything.
Choosing The Term Plan Itself
Cover comes first. A common rule of thumb is 10 to 15 times your yearly income, so on a ₹15 lakh salary that’s ₹1.5 crore to ₹2.25 crore. Few families need all of it. Three insurers, same cover, same term, and the quotes finally line up.
The best term insurance for you is the one that fits your amount, your term and your health, and the cheapest line on the screen isn’t always it.
What To Do Over The Next Month
A Saturday morning is enough for most of it. An online term quote asks about age, income, smoking and health. Three numbers from the endowment papers are worth writing down: the premium, the death cover and the maturity amount. A surrender quote puts the exit cost on paper. Term quotes show what the cover you actually need would cost.
Then the endowment’s job gets written in one sentence. If the sentence is about protection, term takes it over. If it’s about a goal, the policy stays, with the term plan running next to it.
By Sunday evening, the endowment’s three numbers are written down, the surrender quote request is in, and two or three term quotes are open in tabs. The decision then takes about ten minutes, because every figure it needs is on the table. One last thing: tell your spouse where both policies are kept and who the nominee is on each.
