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People mostly confuse Endowment Life Insurance Plans with Whole Life Insurance Plans. Both these insurance plans are permanent life insurance policies but come with some major differences. So to compare these two products, the customers need to know what they are and how they work.
Endowment Life Insurance and Whole Life Insurance Policies accumulate cash value for the policyholder, which means they get a part of their premiums back at some point. They deliver a lump sum amount to the beneficiaries in the event of the policyholder’s demise. The major difference between these two types of insurance policies is that Endowment Life Insurance offers a shorter coverage period, whereas Whole Life Insurance covers the policyholder throughout the life.
Let us go ahead and learn some more differences between these two types of insurance policies and understand how they support you financially.
An endowment life insurance policy is an insurance plan that offers a shorter coverage term. People in the UAE buy an endowment plan to set their funds aside to fulfil long-term goals, such as wedding expenses, buying a house, or child’s education.
Endowment Life Insurance policies mature sooner in comparison to whole insurance policies. In endowment life insurance policies, the policyholders or their beneficiaries get the insurance benefits. The insurance company pays the sum assured either at the policyholder’s demise or at the expiration of the endowment insurance policy. Further, if the policyholder is alive at the time of policy maturity, they get the face value of their insurance policy returned to them.
A whole life insurance policy offers insurance coverage for the entire life as long as the policyholder pays the insurance amount. These insurance plans build cash value that the policyholders can use to borrow funds as and when required. Although this is an additional benefit, the major benefit of a whole life insurance policy is that it remains active throughout the policyholder’s life and offers lifetime benefits.
If the policyholder lives longer than the duration covered by the whole life insurance policy, the whole cash value is paid to the insured. The best part about the whole life insurance policy is that the policyholder can borrow money against the amount invested in the insurance policy and then repay the same in easy monthly installments.
Both Endowment Life Insurance and Whole Life Insurance policies offer saving components and mortality coverage for the policyholders. Endowment Life Insurance Policies offer coverage for a relatively short period and fulfill the aim of providing financial support to policyholders and their family members. Whole Life Insurance Policies, on the other hand, offer longer policy term and is mainly used to provide the beneficiaries with financial security in the event of the policyholder’s demise.
Here are a few major differences between Endowment Life Insurance and Whole Life Insurance policies.
With Endowment Life Insurance policy, a lump sum coverage amount is paid at the time of maturity and death benefits are paid at the time of death. On the other hand, with a Whole Life Insurance policy, the death benefits are paid to the policyholder in full.
With Endowment Life Insurance policy, the insurance premiums are paid for a shorter duration where the premiums become expensive with every increasing month. On the other hand, with a Whole Life Insurance policy, the insurance premiums are paid for a long time as they build cash value.
With Endowment Life Insurance policy, the policyholders get a limited period to pay insurance premiums which helps them build cash value quickly. On the flip side, with a Whole Life Insurance policy, the level insurance premiums are more affordable and provided throughout the life of the policyholder.
There are three types of Endowment Life Insurance policies offered by the insurers in the UAE - unit-linked, with-profit and low-cost endowment insurance. And when it comes to Whole Life Insurance policies, the potential policyholders can get a single premium, limited pay or participating whole life insurance policy.
Endowment life insurance policies are one of the best investment instruments as they offer financial security for the policyholders. However, term plans are always the better option. They offer better insurance coverage with various other benefits such as lower insurance premiums, reasonable sum assured and much more. The only drawback is that they do not provide any sum assured to the policyholders if they outlive the duration of the term plan.
Now that you know about both endowment and whole life insurance plans, you can visit our website and explore your options. You can also go through various features and benefits of both types of insurance plans and make an informed decision. Make sure you give us a call if you need any further assistance.