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Features
Ref. No. KLI/22-23/E-BB/492
Endowment plans are suited for individuals looking for life insurance coverage and long-term savings, while money back policies are more suitable for those who prefer periodic payouts during the policy term while retaining life insurance coverage.
The difference between the endowment plan and the money back life insurance plan lies in the payout structure. With the endowment plan, the policyholder receives the sum assured along with any bonuses upon maturity. Conversely, with a money-back plan, the policyholder receives a portion of the sum assured at regular intervals. In the event of the policyholder’s demise during the policy term, the death benefit comprises the sum assured and applicable bonuses.
Life insurance is an essential tool to ensure the financial security of your loved ones in case of an unforeseen event. With so many options available, choosing the right policy can be overwhelming.
Term life insurance and money back plans are two popular types of life insurance policies that people often consider. While both serve the purpose of providing financial protection to your loved ones, they have significant differences in their features and benefits.
While both of these policies offer financial protection, they have some key differences that can impact your decision about which policy is right for you. To help you make an informed decision, we have put together a table outlining the key differences between term life insurance and money back life insurance.
Feature |
Endowment Plan |
Money Back Life Insurance Policy |
Payouts |
Lump sum at maturity or death only. |
Receives a percentage of the sum assured periodically throughout the term, and a lump sum at maturity or death. |
Focus |
Long-term savings and wealth accumulation. |
Regular income generation and a lump sum benefit. |
Liquidity |
Lower. No access to money until maturity or death claim. |
Higher. Receives periodic payouts throughout the term. |
Returns |
Potentially higher due to a longer investment horizon. |
May be slightly lower due to more frequent payouts. |
Money back Life Insurance Plans mean that money is returned to the insured individuals as a survival benefit after a set period. This plan will give you returns at regular intervals during the policy term. However, if something unfortunate happens to you before maturity, your nominee will receive the sum assured, irrespective of the survival benefits provided to you earlier.
Endowment plans are designed to provide financial protection to the policyholder and their beneficiaries in case of the policyholder’s death. They also offer a savings component that matures at a specified date, usually after a certain number of years.
Term plans with money back provide comprehensive coverage and ensure that you get a percentage of your premium back as a survival benefit, which can help you meet your financial goals or simply enjoy a well-deserved treat.
The primary benefit of investing in a term plan with money back is that it provides financial security to the policyholder’s family in case of their untimely demise. The lump sum payment received by the nominee can be used to pay off debts, meet daily expenses, or invest in the future.
Unlike traditional term insurance plans that only pay out a lump sum amount in case of the policyholder’s death, a term plan with money back also provides regular payouts during the policy term. These payouts act as a safety net and can be used to meet financial goals or emergencies.
A term plan with money back also acts as a savings plan as it allows the policyholder to accumulate wealth over time. The regular payouts received during the policy term can be used to meet short-term financial goals or can be reinvested to accumulate wealth.
Another benefit of investing in a term plan with money back is that it offers tax benefits. The premium paid towards the policy is eligible for tax deduction under Section 80C of the Income Tax Act. Additionally, the payouts received under the policy are also tax-free under Section 10(10D) of the Income Tax Act.
Term plans with money back are affordable as compared to other insurance plans. The premiums are relatively low, and the policyholder can choose the payout frequency and amount as per their financial goals and requirements.
Endowment plans are often chosen by individuals who want both life insurance coverage and a savings component with the potential for returns. Let us take a closer look at the benefits offered by these plans:
Endowment plans provide a death benefit to the nominee in the event of the policyholder’s demise during the policy term. This death benefit is typically a predetermined sum assured, which is the amount guaranteed to be paid out.
Unlike term insurance, which only provides a death benefit, endowment plans also offer a maturity benefit. If the policyholder survives the entire policy term, they receive a lump sum amount, which includes the sum assured along with any accumulated bonuses or returns.
A portion of the premium paid towards an endowment plan is allocated to investments, such as bonds, stocks, or other financial instruments. Over the policy term, these investments accumulate, and the policyholder receives a share of the returns.
Endowment plans come with a fixed policy term, which can range from 10 to 30 years or more. The policyholder needs to pay regular premiums throughout this term to keep the policy in force.
Premiums for endowment plans can be paid on a monthly, quarterly, semi-annual, or annual basis, providing flexibility to policyholders based on their financial preferences.
The sum assured is the guaranteed benefit of the endowment plan. In addition to this, policyholders may also receive non-guaranteed benefits in the form of bonuses or dividends, depending on the performance of the underlying investments.
When it comes to financial planning, one of the most important decisions you can make is to buy life insurance. However, with so many options available, it can be difficult to determine which type of policy is right for you. Term plans with money back are a popular choice for those who want to protect their loved ones financially while also receiving a return on their investment.
For young families, a term plan with money back can be an excellent option. These policies can provide financial security in the event of an unexpected death while also allowing the policyholder to receive a lump sum at the end of the term. This can be especially helpful for families who are still building their financial stability.
Retirees can also benefit from a term plan with money back, as it can provide a source of additional income in their golden years. The lump sum received at the end of the term can be used to supplement retirement income or cover unexpected expenses. Additionally, since term plans are typically less expensive than permanent policies, retirees can enjoy the benefits of life insurance without breaking the bank.
Entrepreneurs and business owners can also find term plans with money back to be a good option. Since many entrepreneurs have irregular income streams, it can be challenging to commit to a permanent life insurance policy with fixed premiums. Term plans, on the other hand, typically have lower premiums and more flexibility, making them a more attractive option.
Single parents can also benefit from the best money back policy, as it can provide peace of mind knowing that their children will be taken care of financially in the event of their death. The lump sum received at the end of the term can be used to fund their children’s education or cover other important expenses.
Life insurance is not just a protective shield for your loved ones; it can also be a valuable financial tool. Tailoring your choice to your specific needs and circumstances ensures that you not only provide security for your family but also pave the way for financial growth and stability.
The distinction between money back and endowment policies lies in their focus, payouts, liquidity, and returns. While endowment plans emphasize long-term wealth accumulation, money-back policies aim for regular income and periodic liquidity. Understanding these differences is crucial in making an informed decision aligned with your financial goals.
1
Money Back policies are suitable for individuals who prefer receiving periodic payouts to meet short-term financial goals, while Endowment Policies are more focused on providing a lump sum amount at the end of the policy term for long-term goals.
2
Yes, policyholders often have the flexibility to choose the intervals at which they receive the survival benefits in a money back policy, allowing for customization based on their financial needs.
3
Individuals seeking both life cover and a savings component may find endowment policies more suitable, as they offer a lump sum at maturity, serving both purposes.
4
Premiums for money back and endowment policies may vary based on factors like the sum assured, policy term, and the age and health of the policyholder. It’s essential to compare and choose based on individual preferences and financial goals.
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Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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