Term vs whole life vs endowment: which and why
These three life products do very different jobs. Confusing them is how people end up under-protected and over-charged. The short version: term is pure protection, endowment mixes protection with savings, and whole life extends cover across your lifetime.
Term insurance: pure protection
Term pays a large sum assured to your family if you die during the policy term, for a low premium. There is usually no maturity payout, and that is the point: all your premium buys protection, not savings. It is the most efficient way to cover income replacement and loans.
Endowment: protection plus savings
Endowment plans combine a smaller life cover with a savings or maturity benefit. Premiums are far higher for the same cover because part goes into savings. Returns are typically modest; the trade-off is a lump sum if you survive the term.
Whole life: lifelong cover
Whole life extends protection across your whole lifetime (often to a very high age) and can build a cash value. It suits specific estate-planning or dependant-for-life needs rather than plain income replacement.
Which should you pick?
- Need to protect your family cheaply? Term, sized to replace income and clear debts.
- Want forced savings with some cover? Endowment, but compare its returns against keeping term plus a separate investment.
- Specific lifelong or legacy need? Whole life, chosen deliberately.
For most families, a large term plan plus separate investing beats bundling the two. See our term insurance basics.