LIC vs Term Insurance — Which is Better for You?
This is one of the most debated questions in personal finance. Should you buy a traditional LIC endowment plan or invest in a pure term plan and invest the rest? Let's settle this once and for all with a data-driven comparison.
Understanding the Two Options
Traditional LIC Plans (Endowment / Money Back)
These plans combine insurance cover with a savings component. You pay a relatively higher premium, and at the end of the policy term you receive a sum that includes your Sum Assured plus bonuses. Examples: New Jeevan Anand (915), Jeevan Umang (845).
Term Insurance (LIC Tech Term 854 / Other Term Plans)
These provide pure life cover for a specific period. If you die within the term, your nominee gets the full Sum Assured. If you survive, you get nothing. The premium is significantly cheaper than endowment plans.
Side-by-Side Comparison
| Feature | LIC Endowment (e.g. Plan 915) | Term Insurance (Plan 854) |
|---|---|---|
| Purpose | Insurance + Savings | Pure Protection |
| Premium (₹10L cover, 30yr, 20yr) | ~₹50,000/yr | ~₹5,000/yr |
| Cover Amount | ₹10 lakh | ₹10 lakh |
| Maturity Benefit | SA + Bonus (₹18L–₹22L est.) | ₹0 (no maturity) |
| Death Benefit | SA + Bonus | Full SA (same amount) |
| Investment component | Built-in savings | None — invest separately |
| IRR / Returns | ~5%–6% (endowment) | N/A (pure risk) |
The "Buy Term + Invest the Difference" Strategy
Financial advisors often recommend buying a cheap term plan and investing the premium savings in mutual funds or PPF. Let's see how this works:
- Endowment premium: ₹50,000/yr
- Term premium: ₹5,000/yr
- Annual savings: ₹45,000/yr invested in mutual funds at 12% CAGR over 20 years
- Result: ₹45,000/yr at 12% for 20 yrs = ~₹36 lakh corpus vs. ~₹20 lakh from endowment
On paper, term + mutual fund wins on pure returns. But life is never that simple.
When LIC Endowment Plans Win
- ✅ You lack discipline to invest the "saved" premium separately
- ✅ You want guaranteed, predictable, risk-free returns
- ✅ You need a forced savings mechanism
- ✅ You're in a lower tax bracket and value Section 80C benefits
- ✅ You want government-backed, sovereign-guaranteed insurance
- ✅ You're the only breadwinner and want wealth + protection in one product
When Term Insurance Wins
- ✅ Maximum life cover per rupee spent
- ✅ You're a disciplined investor who can invest the premium savings
- ✅ Young family, high financial obligations, tight income — you need max coverage affordably
- ✅ You already have other savings/investment vehicles (EPF, PPF, MF)
Our Verdict
There is no universal winner. The best choice depends on your financial discipline, risk appetite, existing investments, and financial goals. Our recommendation for most middle-class Indians aged 25–35: buy both — a high-cover term plan (₹50L–₹1Cr) for protection, and a moderate LIC endowment plan for guaranteed savings. This gives you the best of both worlds.
🛡️ Calculate your LIC Tech Term premium and compare it with endowment plan costs using our free calculators.