If you’re a salaried employee in India, chances are you’ve been approached by an LIC agent at least once in your life. “Sir, this plan will give you insurance and savings,” they say. Sounds good, right?
But here’s the truth: when it comes to life insurance, the biggest confusion for most salaried professionals is LIC Policy vs Term Insurance. Both have their place, but which one actually suits you better? Let’s break it down in simple terms.
💡 First, What Are These Plans?
🔹 LIC Policy (Endowment/Traditional Plans)
- Offered by Life Insurance Corporation of India (LIC).
- Combines insurance + savings.
- You pay a premium every year, and at the end of the policy term, you get a maturity amount.
- Premiums are higher because they include both insurance cover and an investment portion.
Also, these plans are often promoted for the tax benefits from insurance, which makes them appealing to salaried employees.
👉 Example: If you pay ₹50,000 per year for 20 years, you get insurance cover (say ₹10–15 lakhs) and at maturity, you might get ₹12–15 lakhs back.
🔹 Term Insurance
- Pure life insurance cover, nothing else.
- You pay a small premium for a large sum assured.
- If something happens to you, your family gets the full sum assured. If you survive, there’s no maturity benefit.
👉 Example: A 30-year-old salaried person can get ₹1 crore cover for just ₹10,000–₹15,000 per year.
📊 LIC Policy vs Term Insurance: Side-by-Side Comparison
| Feature | LIC Policy (Endowment) | Term Insurance |
|---|---|---|
| Premium Cost | High (₹40,000–₹60,000/yr for decent cover) | Low (₹10,000–₹15,000/yr for ₹1 crore cover) |
| Insurance Cover | Low (₹10–15 lakhs typical) | High (₹50 lakh–₹2 crore possible) |
| Maturity Benefit | Yes (money back at end of policy) | No (only death benefit) |
| Returns | 4–6% approx (low, like FD) | Not applicable |
| Flexibility | Limited | High (you save/invest separately as you like) |
| Best For | Those who want forced savings | Those who want maximum protection at minimum cost |
👨💼 Which One Should Salaried Employees Choose?
If you’re earning a monthly salary, your first priority should be financial protection for family.
- ✅ Term Insurance gives you high coverage at low cost. This ensures your spouse, kids, or parents are financially secure if something happens to you.
- ❌ LIC endowment policies look attractive because of maturity value, but in reality, they offer low returns and insufficient cover.
👉 Here’s the smart approach:
- Take Term Insurance for protection (₹1 crore cover if possible).
- Invest the difference in premium (say ₹40,000 saved) in SIPs, PPF, or ELSS for wealth creation.
This way, you get both — protection and higher returns.
📌 Example for Better Clarity
Let’s say you’re 30 years old, earning ₹60,000/month.
- LIC Policy (Endowment): ₹50,000 annual premium → Cover = ₹15 lakh + maturity benefit after 20 years.
- Term Insurance + SIP: ₹12,000 annual premium → Cover = ₹1 crore. Remaining ₹38,000 invested in SIP at 12% return → ~₹25 lakhs in 20 years.
Who’s the winner? Clearly, Term Insurance + Investment.
✅ Final Takeaway
For salaried employees, Term Insurance is the smarter choice for life cover. Use the money you save on premiums to invest in mutual funds, PPF, or NPS.
LIC endowment policies can work if you want a “safe but low-return savings tool,” but don’t confuse them with a solid financial plan.
💡 Golden Rule:
- Insurance = Protection
- Investment = Wealth Creation
Don’t mix the two!
👉 What do you think? Are you currently paying for an LIC policy, or are you considering switching to Term Insurance?
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