Do I need a term life policy if I have an endowment policy?

The purpose of both policies are different.

Term life insurance is an insurance product that insures you for a period of time or until a certain age. It provides coverage against death and there will be a payout in the event of the policyholder’s death/total and permanent disability/terminal illness diagnoses.

An endowment plan is a type of life insurance policy that combines savings and protection. It pays out either on death or when the policy matures. Due to its low life coverage component, one should not solely depend on an endowment plan for protection purposes.

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Hi anon,

A term policy is meant to give you a lump sum of money in the event of the covered event occuring (could be death/TPD/CI, etc) and only during the covered duration (i.e. the term). The leverage is multiple times of your premium, e.g. a $100/mth term plan could cover $1million upon death/TPD straight away after policy incepts.

It is totally different from an endowment policy. Yes, there is a death benefit for an endowment policy, but it is usually between 101% to 105% of the premiums paid. So if you are putting aside $500/mth into retirement saver, your death coverage after the first year of premiums would be around $6K.

Thus the leverage is really negligible and it is not how you would want to protect your dependants and cancel your liabilities in an unfortunate event. You can still consider the death coverage amount as part of your payout, but it is based on how much you have put into the plan, which means early years would really see very little coverage (unless your premiums are huge, but even so, there is little leverage). Contrast that to a term plan whereby $1 million is paid out in the first year even if the plan is a 30 year plan and the client passed away after the first premium paid.