Financial planning is best done when you have the right mix of security and savings. You need to combine the security of life insurance with adequate savings for a decent life for you and your family. In this regard, an endowment plan can be very effective. It is such an insurance product that combines two benefits- a savings component and life insurance. While one helps you build long-term savings, the other ensures your family’s financial protection, and together, they create a financial safety net that’s both practical and forward-looking.
What Role Do Each of These Policies Play?
An endowment plan is a life insurance policy that pays out a lump sum after a specific term or on the death of the insured. It’s designed for people who want the dual benefit of life cover and savings. This type of plan not only secures your family’s future in your absence but also builds wealth for planned goals, such as buying a new house, furthering your child's education, or even retirement.
On the other hand, a term insurance offers a large cover for a relatively low premium. Unlike endowment policies, there is no payout if the insured survives the policy term. It’s purely designed for financial protection.
Now, when you combine the two, you’re not just insuring your life, but you’re also preparing for the future by growing your wealth.
The Benefits of Combining Endowment and Term Plans
The endowment plan acts as your savings engine, offering both guaranteed returns and tax-saving benefits. The term insurance acts as your protection layer, making sure that your financial plan doesn’t collapse under stress or in your absence.
For instance, consider the following scenarios:
Situation
Only Endowment Plan
Only Term Insurance
Combination
The policyholder survives the term
Receives maturity amount
No payout
Receives maturity amount
Policyholder passes away mid-term
Family receives the sum assured and bonuses (if any)
The family receives a large sum assured
The family receives benefits from both policies
Need for emergency funds
Some plans allow partial withdrawals
Not applicable
More flexibility with savings-based plan
When combined, these two policies offer complementary features that cater to different needs at different life stages. These include -
Protection: The term plan ensures your dependents don’t face financial pressure if something happens to you. It offers a high sum assured at a low premium, making it ideal for young earners.
Savings with Discipline: The endowment plan brings a habit of saving regularly. Whether you’re saving for your child’s college fees or a future home, it keeps your financial goals on track.
Loan Option: Some endowment plans allow you to borrow against your policy during emergencies. This option doesn’t exist with term insurance.
Tax Benefits: Both plans are eligible for deductions under Section 80C, and the maturity amount under the endowment plan is generally tax-free under Section 10(10D), subject to conditions.
When you add these up, the result is a stable, long-term plan that adapts to your family’s evolving financial needs.
Customising Based on Risk Appetite and Income Stage
One of the most practical aspects of combining the two policies is that it allows personalisation. For someone in their 20s or early 30s, a unit-linked endowment plan could be ideal since it offers market-linked growth along with life cover. When paired with a term insurance policy, the individual benefits from high-risk coverage while also potentially accumulating long-term wealth.
If you’re in your 40s, you might prefer a full-profit or low-cost endowment plan with guaranteed returns. By this stage, you’re likely more focused on stable returns and securing retirement. The term insurance can then serve as a secondary layer of protection, especially if you’re the sole earner.
In either case, the combination lets you strike the right balance between safety and return.
When to Consider Combining the Two
Most people only think of life insurance as a standalone protection tool. But in reality, a savings-linked insurance plan like an endowment plan can do more than just protect; it prepares you for big life goals.
Combining the two is especially useful if:
You have dependents and financial responsibilities that will continue even if something were to happen to you.
You're aiming to save for specific life goals, such as your child's higher education, your spouse’s retirement fund, or even your own second act.
You want to protect your savings from being depleted in emergencies by having an additional term life insurance policy in place.
How to Structure Your Plan Smartly
When planning for both an endowment plan and term insurance, start with your monthly budget. You don’t need to buy the most expensive plan; instead, choose what fits your income and responsibilities.
Here’s a simple rule of thumb:
Monthly Income (₹)
Recommended Monthly Premium (Total for Both Plans)
Ideal Ratio (Term: Endowment)
30,000 – 50,000
₹ 2,000 – ₹ 3,500
60:40:00
50,001 – 1,00,000
₹ 4,000 – ₹ 6,000
50:50:00
Above 1,00,000
₹ 7,000 and above
41:00:00
These are not fixed rules, but they help set a basic guideline to follow while structuring your insurance mix.
It’s also important to review your coverage every few years. Life goals evolve, and so should your insurance and savings strategy. You might start with just term insurance from premium insurers like Axis Max Life Insurance, early in your career, and add an endowment plan from them once you’re earning more steadily.
Conclusion
On its own, a term plan gives peace of mind and an endowment plan, by itself, gives long-term savings. But when the two are paired smartly, they complement each other and cover each other’s gaps. You get risk protection from term cover, guaranteed or market-linked savings from the endowment policy, tax benefits from both, and the flexibility to tailor your insurance mix to your goals.
So, whether you're starting your career or preparing for your child’s future, it’s worth considering this combination, especially from premium insurers like Axis Max Life Insurance. It simplifies planning and gives you more control over your financial journey.
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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any decisions related to this matter. Tax benefit is subject to change as per the prevalent tax laws.
