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Term insurance vs LIC endowment — the honest comparison

📅 Updated May 2026⏱ 5 minute read✍️ InsureIQ · Not an IRDAI advisor
The short answer

For the same Rs.1 crore life cover, term insurance costs Rs.800/month. An LIC endowment costs Rs.5,000/month. The agent earns 25–35% commission on the endowment. That commission difference explains most agent recommendations in India.

The numbers — side by side

A 32-year-old earning Rs.60,000/month with a family of three. They need Rs.1 crore in life cover.

FactorTerm InsuranceLIC Endowment
Monthly premiumRs.800–1,000Rs.4,500–6,000
Life coverRs.1 croreRs.10–20 lakh typically
Agent commission (year 1)5–7%25–35%
What family gets if you dieFull Rs.1 croreSum assured only
What you get if you surviveNothingMaturity value
Better for protection?✓ Yes✗ No
Better for investment?✗ No✗ No — PPF beats it

⚡ The math that matters: If you pay Rs.5,000/month for an endowment instead of Rs.900/month for a term plan — the Rs.4,100/month difference invested in PPF at 7.1% for 20 years becomes approximately Rs.21 lakh. The endowment maturity value in the same period is typically Rs.12–16 lakh. You are worse off — and protected for far less.

Why agents push endowment plans

An agent selling you a Rs.60,000/year endowment plan earns approximately Rs.15,000–21,000 in the first year alone. The same agent selling you a Rs.10,000/year term plan earns Rs.500–700.

This is not a conspiracy — it is incentive structure. Agents are human. They recommend what earns them more. The way to protect yourself is to know this going in.

When an agent says "term insurance has no returns" — what they mean is "I earn nothing on it." That is not the same thing as it being wrong for your family.

When endowment might make sense

To be fair — there are limited cases where endowment has some logic:

If you have no financial discipline and would spend the premium difference instead of investing it — an endowment forces you to save. But for the same forced saving with higher returns and better protection, PPF is almost always superior.

For most salaried Indian families with dependents — term insurance + PPF is significantly better than any endowment plan.

How much term insurance do you actually need?

A simple calculation: 10 times your annual income + all outstanding loans.

If you earn Rs.60,000/month (Rs.7.2 lakh/year) and have a home loan of Rs.30 lakh outstanding:

Need = Rs.72 lakh + Rs.30 lakh = Rs.1.02 crore minimum.

Buy at least Rs.1 crore. Online term plans from LIC Tech Term, HDFC Click 2 Protect, and ICICI iProtect Smart are 30–40% cheaper than agent-sold plans for identical cover.

Frequently asked questions

I already have an LIC endowment policy. Should I surrender it? +
Not automatically. Calculate the surrender value versus the total premiums paid. If the policy is in its early years (under 3 years), surrender value may be zero. If it has been running for 10+ years, the surrender value may be significant. Compare: (remaining premiums × years left) versus (surrender value + term plan cost). Make the decision with actual numbers, not rules of thumb.
Is LIC safe compared to private insurers? +
LIC is government-backed and extremely safe. But safety of the insurer is different from quality of the product. A term plan from LIC is excellent. An endowment from LIC is still an endowment — the comparison above applies regardless of which company sells it. LIC's own term product, LIC Tech Term, is one of the better term plans available online.
What is a ULIP and should I buy it? +
A ULIP (Unit Linked Insurance Plan) combines insurance with market-linked investment. Charges include mortality charges, fund management fees, and premium allocation charges that can consume 3–5% of your money annually. For most people, a term plan + mutual fund or PPF performs better over 15+ years after accounting for ULIP charges.
How much life cover does your family actually need?

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