Forty times the price

Published 1 October 2026

Here is the entire Indian life insurance business reduced to one arithmetic problem. A thirty-year-old can buy Rs.1 crore of life cover for about Rs.11,000 a year. Or he can buy the same Rs.1 crore of cover bundled with a savings plan for about Rs.4.5 lakh a year - forty times the price - and get his money back at maturity with a return that loses to a government small-savings scheme. India, overwhelmingly, is sold the second one. This chapter is about the math the salesman hopes you never do.

The comparison is not rhetorical; it is the market's own pricing. A Rs.1 crore term policy for a 30-year-old man costs roughly Rs.10,000-12,000 a year. An endowment plan for the same cover costs Rs.4-5 lakh a year - the same protection, at about forty times the annual outlay. The endowment buyer is told the difference is not a cost but a saving: the term premium is "lost" if you survive, while the endowment "returns your money." What returns is the capital plus a bonus that, on the industry's most famous endowment product, has historically worked out to about 5-5.5% a year. In the same period, the Public Provident Fund - a government scheme requiring no salesman at all - paid 7.1%, and a dull equity index fund did better still. The endowment buyer pays 40x the price of his cover to underperform the post office.

Now run the alternative the industry calls "buy term and invest the difference," the phrase every agent is trained to mock. Take the Rs.4.5 lakh endowment premium. Spend Rs.11,000 on the term plan - identical death cover. Invest the remaining Rs.4.39 lakh every year in anything earning 7%. After twenty years the endowment pays its maturity amount; the term-plus-investment family holds more money and has carried the same life cover throughout. The gap between the two piles is not a rounding error. It is the price of the machine: the agent's first-year commission, the insurer's margin, the sales contest, the convention in Bangkok. The buyer funds all of it, and in exchange receives the discipline of a locked box he can only open by accepting a fraction of his own money back.

The illustration game

If the math is this bad, how does the sale survive the customer's own calculator? Because the calculator is rigged at the source. Every policy is sold with a "benefit illustration" - the official projection of what your money becomes - and for years the illustrations were permitted to show assumed returns of 6% and 10%, numbers chosen not because the product earned them but because regulation allowed the salesman to print them. The customer saw a table in which Rs.4.5 lakh a year became a crore-plus at maturity, signed under it, and discovered the real bonus rate only in the annual statement, year by year, one disappointment at a time. The illustration was never a promise; the small print said so. It was a sales device with a regulatory license, and the license is the scandal.

Run the honest comparison one more time, slowly, because this is the calculation that ends the pitch. Year one to twenty: the endowment buyer pays Rs.4.5 lakh annually and, at the historical 5-5.5% these plans deliver, collects roughly Rs.1.55 crore at maturity, with Rs.1 crore of life cover along the way. The term-and-invest buyer pays Rs.11,000 for the same Rs.1 crore cover, invests Rs.4.39 lakh a year at a boring 7%, and arrives at roughly Rs.1.9 crore - about Rs.35 lakh more - with identical protection and full liquidity in an emergency. For the endowment to win, equity and debt markets would have to underperform a government-guaranteed small-savings rate for two straight decades, in which case the insurer's own investments, priced off the same markets, would be cutting the bonus anyway. There is no universe in which the buyer of the expensive product beats the buyer of the honest one. There is only a universe in which he never runs the numbers - and the machine's entire sales force exists to populate it.

Why a bad product outsells a good one forty to one

The term plan is the best product in Indian insurance and the least sold, and the reason is one word: commission. First-year commission on a traditional endowment plan can run to a third or more of the premium - on a Rs.4.5 lakh premium, over a lakh of rupees to the seller in year one. First-year commission on an Rs.11,000 term premium is a few thousand rupees. The same hour of the agent's life pays perhaps thirty times better if he sells you the endowment. The regulator's September 2026 paper states the outcome in the flat prose of a watchdog that has stopped pretending: distributor remuneration in the corporate agency channel rose 125% between FY23 and FY25 while new business premium grew 28% - pay growing four times faster than sales, and reaching nearly 27% of first-year premium before counting the rewards and incentives that add another 30-60% on top of base commission.

The mis-selling data says the pitch works. Complaints to the grievance portal Bima Bharosa crossed two lakh in a year; the ombudsman's caseload is dominated by unfair business practice; and endowment plans are the single most complained-about product in the mis-selling pile - the details, and the named numbers, are in the chapter on the complaint box. The pattern is older than the data. Every Indian family has the policy: bought from a relative, premium paid for seven years, surrendered or lapsed when the truth about the returns surfaced, a small fraction of the money returned. The product is not failing. The product is performing exactly as priced - for the seller.

There is an honest use for an endowment plan, and it is worth stating plainly so the rest of this file cannot be called one-sided: for a saver who would otherwise never save at all, a forced, locked, penalty-walled commitment has value, and the life cover is real. The industry's defense of the product ends there, and it cannot survive contact with the fee structure. A machine that wanted to help undisciplined savers would charge them modestly. This one charges them the highest distribution costs in the financial system, on the largest premiums they will ever sign, for returns below the post office - and calls it tradition.

The tax hook

There is one more reason the endowment outsells the term plan, and it arrives every March: the tax deadline. The endowment premium qualifies for the Section 80C deduction; the maturity proceeds, under Section 10(10D), arrive tax-free. The agent's March pitch writes itself - "save tax and build a corpus" - and it works because it is technically true and practically a trap. The tax saved on the premium is a fraction of the return forgone on the lockbox; the tax-free maturity is tax-free because there is barely any gain to tax. A product whose entire investment case is its tax treatment is not an investment; it is a deduction with a policy attached, and the deduction is available on the honest products too - the term premium, the PPF, the ELSS fund - without the 40x price tag. But those products do not pay for the agent's March, and so the March belongs, every year, to the endowment. The industry's sales calendar peaks in the tax season the way a harvest peaks: the last quarter of the financial year is when the machine collects.

Watch the annual numbers with that calendar in mind and the whole chapter snaps into focus. First-year premium of Rs.1.25 lakh crore, commission of Rs.60,800 crore, persistency at 68% - these are not separate facts. They are one machine photographed from three sides: the tax hook pulls the customer in March, the commission pays the puller in April, the product disappoints by the following March, and the lapse statistics record the disappointment the year after. The endowment is not a mystery of Indian financial behavior. It is a tax-season artifact with a thirty-year tail, and the tail is what the surrender table collects.