Term vs endowment insurance — tax and value compared

Premiums on both term and endowment policies qualify for the Section 80C deduction, within the Rs 1,50,000 limit, in the old regime — subject to the premium being within the prescribed proportion of the sum assured. So the upfront tax break is similar; the difference is what you get for the premium.

A term plan is pure life cover — high sum assured for a low premium, with nothing paid back if you survive the term. It's the most cost-effective way to protect your family, and the death benefit to nominees is exempt. There's no maturity payout to tax.

An endowment plan bundles life cover with a savings element, paying a maturity amount if you survive. The premium is far higher for the same cover, and the investment return is typically modest. The maturity proceeds can be exempt under Section 10(10D) within the prescribed conditions.

Because endowment plans mix low cover with low returns at a high premium, many advisers suggest buying a term plan for protection and investing the difference separately (in ELSS, PPF or mutual funds) for growth. You get more cover and better returns for the same outlay.

If you want maximum protection cheaply, term wins clearly. If you specifically want a single bundled product with a guaranteed payback and are comfortable with lower returns, an endowment plan suits — just go in knowing the trade-off. The 80C benefit is similar either way.