Endowment Plans: Are You Overpaying for Low Returns?
Endowment plans bundle life insurance with savings, but the returns are often 4-6% — far less than mutual funds or even FDs. Here's who should actually buy one and who should skip it.
An endowment plan giving 5% returns means your ₹5,000/month premium buys less than a ₹200 daily chai habit compounds at equity rates.
Your money works harder in term + mutual funds than endowment plans
Key Takeaways
Calculate your endowment plan's IRR using an online XIRR calculator — enter all premiums paid and the maturity amount to see your real return.
Compare: buy a ₹1 crore term plan (₹10,000–₹15,000/year) separately and invest the remaining premium in a diversified mutual fund SIP instead.
If you already hold an endowment plan, check its surrender value after 3 years — sometimes redirecting to a better instrument makes financial sense.
Endowment plans bundle life insurance with savings, but the returns are often 4-6% — far less than mutual funds or even FDs. Here's who should actually buy one and who should skip it.
Here's what happened: Endowment plans combine a life cover payout with a maturity benefit, but internal returns (IRR) typically range between 4% and 6% annually.. Premiums in endowment plans are significantly higher than pure term insurance — you pay extra for the savings component bundled inside.. Maturity proceeds and death benefits from endowment plans qualify for tax exemption under Section 10(10D), subject to premium-to-sum-assured ratio conditions..
What you should do: Calculate your endowment plan's IRR using an online XIRR calculator — enter all premiums paid and the maturity amount to see your real return.. Compare: buy a ₹1 crore term plan (₹10,000–₹15,000/year) separately and invest the remaining premium in a diversified mutual fund SIP instead.. If you already hold an endowment plan, check its surrender value after 3 years — sometimes redirecting to a better instrument makes financial sense..
Endowment plans make sense mainly for people who lack financial discipline and need forced savings — not for anyone comfortable running a basic SIP.
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- [1]“Endowment plans explained: What they are and who should consider them” Personal Finance News in CNBCTV18, Personal Finance Latest News, Personal Finance News · 23 Jun 2026
This article is reported by GoCredit's Editorial Team based on the source above. GoCredit synthesises, contextualises, and adds India-borrower-relevant analysis. We are not the original publisher.