This secures both, the savings and provides insurance to the policyholder. Money-Back Plan is a life insurance policy designed to pay a percentage of sum assured at regular intervals instead of the lump-sum amount in case of maturity or death. It is an endowment plan with the benefit of liquidity.
Whereas all those who want to protect their lives along with investment in such a way that they get an amount regularly at intervals should opt for Money-Back Plan. This plan is helpful in short term investment like an admission of your child in college for a particular course. The amount of money paid at intervals brings motivation to the policyholder for planning small family activities and boosts him up in progressing in life with the help of regular income. So, those individuals having such plans can opt for Money-Back Plan.
An endowment plan and money-back plan both are the types of life insurance plans. Both plans provide maturity and death benefits. The policyholder can use this plan both as an investment plan and an insurance plan. Moreover, the sum assured is paid both in case of death and survival in the endowment plan. Because of the additional features provided by both, the premiums are higher than normal plans.
Both the plans are not dependant on market like ULIPs. The risk in both the plans is a bit low because the amount the policyholder invests is on a fixed rate which is agreed beforehand at the time of buying the policy. The difference between the endowment plan and money back plan is that in the endowment plan one gets the sum assured and the bonus at the completion of the maturity period.
Whereas in a money-back plan the policyholder gets a percentage of sum assured at regular intervals. The death benefit is in the form of the sum assured and applicable bonuses in case the policyholder dies within the policy term.
The table mentioned below highlights a few of the differences between an endowment and money-back plan:. The above-mentioned facts must be helpful to you in opting between an endowment plan and a money-back plan. So, you are free to choose one of the life insurance plans depending upon your preferences. Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries.
Veena Gehlot. HI, my name is Veena Gehlot. I am a widow and have 2 children. After my husband s death, Life was very difficult both emotionally and financially. Thanks to my husband s Exide Term Insurance policy, I am able to fulfil my children s education. Thankyou Exide Life Insurance. Once declared, the bonuses are guaranteed to be paid on maturity or on death.
As a non-participating plan, an endowment policy will specify the maturity benefit, since non-participating plans offer guaranteed investment benefits. For example, an insurance policy can specify the maturity benefit as a percentage of the total premiums paid in the policy as maturity benefit. While an endowment policy will pay the investment benefit at the end of the policy term, a money-back policy staggers the investment benefit throughout the policy term at regular intervals.
A money-back structure is typically offered by traditional policies. So as a participating plan, that pegs the investment benefit to the performance of underlying participating fund and distributes it in the form of yearly bonuses, a money-back plan usually staggers the payment of sum assured at regular intervals during the policy term and on maturity pays the sum of bonuses.
Money backs are quite popular in the non-participating structure as well. Here, the payouts could be defined as a percentage of the sum assured or the premiums. Given that a money-back plan offers investment benefits early on, the rate of return on these plans is a tad lower compared to endowment policies. Never miss a story! Stay connected and informed with Mint. As we are approaching the end of the financial Year , we are sure that many of you may be looking for some tax savings investments.
Our experience reveals that, very often investors opt-in for a life Insurance policy, which offers the feature of an insurance-cum-investment plan in their endeavour to save some tax as well as earn a return on their investment.
Download our : Equity Guide for FREE to know how to build a stock portfolio You see, while there are various types of Life Insurance policies which can help you save tax, in this article we shall compare an Endowment Policy to a Money Back Policy and try to analyse which could suit your requirement better. Endowment Policy It is a Life Insurance policy in which part of the premium paid is utilized towards providing insurance cover, the rest of the portion is invested.
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