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 life insurance 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.
Key takeaways
- A type of life insurance known as term insurance provides your family with financial security if something unfavourable occurs while the policy is still in effect.
- A money back life insurance is an endowment plan which will provide you with a life cover for a specific term.
- 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.
- A term plan with money back also acts as a savings plan as it allows the policyholder to accumulate wealth over time.
- Retirees can also benefit from a term plan with money back, as it can provide a source of additional income in their golden years.
What is Term Insurance?
The type 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 money back 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.
Also Read: What is Endowment Plan?
Term Life Insurance v/s money back life insurance
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 moneyback life insurance.
Criteria
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Term Life Insurance
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Money back Life Insurance
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Death Benefit
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Paid in the event of the policyholder’s death.
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Paid in case of the policyholder’s death
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Premiums
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Lower premiums for higher coverage
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Higher premiums for lower coverage
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Cash value
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No cash value
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Builds cash value over the policy term
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Policy surrender
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No surrender value
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Surrender value available after a certain period of time
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Maturity benefit
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No maturity benefit
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Maturity benefit paid at the end of the policy term
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Benefits of Term Plan with Money Back
Term plans with money back are a type of life insurance policy that offers the best of both worlds - financial protection for your loved ones in case of an unfortunate event and guaranteed returns in case you survive the policy term. These plans not only provide comprehensive coverage but also 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. With term plans with money back, you can secure your family’s future, get tax benefits, and also have the option of liquidity.
Let us take a look at some of the benefits of a term plan with money back:
Provides Financial Security
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.
Offers Regular Payouts
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.
Acts as a Savings Plan
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.
Tax Benefits
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.
Affordable Premiums
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.
Who Should Buy a Term Plan with Money Back?
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. But who should buy term plans with money back?
It is time to explore who could benefit from this type of policy.
Young Families
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
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
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
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.
Bottom Line
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. Money back plans can help people who have previously met their protection needs and have extra funds reach their long-term financial objectives.
Remember, when choosing a plan, consider the goal of the investment.
