Term Life Insurance Vs Money Back Policy Plan
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Term Life Insurance Vs Money Back Life Insurance

Term Life Insurance Vs Money Back Life Insurance
  • 16th Jun 2022 |
  • 6,490

A sort of life insurance known as term insurance provides your family with financial security if something unfavourable occurs while the policy is still in effect. You can purchase the plan for a small premium, and the family will be given the money insured. The strategy is made to protect against the possibility of death. However, you do not receive any maturity benefits if you outlive the policy duration.

What is a money-back life insurance plan?

A moneyback life insurance is an endowment plan which will provide you with a life cover for a specific term. This plan will give you returns at regular intervals during the policy term. These returns are known as survival benefits. 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.

Term Life Insurance v/s moneyback life insurance

You need to understand the difference between the two insurance plans to make a well-informed decision.

Coverage

The money-back term plan is a life cover, providing you with high coverage at a low premium. Conversely, a moneyback insurance policy has a lower sum assured for the same premium amount. In case of the insured’s death, a term plan with money back will pay the lump sum to provide for the financial security of the family members, while the moneyback plan will pay the sum assured and the accrued bonus.

Return on investment

In a money-back term plan, the insurance company will not provide any survival benefits if you survive the policy term. The money-back plan, on the other hand, will reimburse a particular portion of the sum assured at predetermined intervals throughout the policy period.

Tax benefit

Both insurance plans offer tax benefits. The premium amounts paid for term life insurance and moneyback plans are exempted from taxation under Section 80C of the Income Tax Act, 1961. The maximum exemption amount is ₹1.5 lakh. No tax is payable on maturity, death, or survival benefits.

Financial Support

Returns are frequently granted under money-back policies. Therefore, you can use this sum to help pay for your family’s expenses this month. However, because term plans do not pay out during the policy’s term, you won’t receive any financial support during that period.

Cancellations

If the premium is not paid by the due date, a term plan with money back is automatically cancelled, and you will not be paid any benefits. A money-back policy, however, allows you to cancel the coverage and reclaim the sum assured for a small price.

When you evaluate how term insurance and money-back term plans differ from one another, it becomes evident that both policies have advantages; however, because term insurance delivers a higher sum assured, it is favoured.

Tenure

Plans for term insurance provide coverage for a predetermined amount of time, such as 5, 10, 15, or 30 years. In contrast, whole life insurance plans have variable terms and are often valid until the life assured is 100 years old.

You should take your financial needs and personal ambitions into account while deciding between the two. A sort of protection insurance that does not include investing components is called term insurance. If something unfavourable happens to you, your loved ones will have financial stability. If you want the plan to be profitable, you must pick a money-back life insurance policy. It provides insurance coverage and also an investment plan. Moneyback plans can help people who have previously met their protection needs and have extra funds reach their long-term financial objectives. When choosing, consider the goal of the investment.

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Ref. No. KLI/22-23/E-BB/492

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