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Features
Ref. No. KLI/22-23/E-BB/492
A money back policy combines insurance with savings, offering periodic payouts, or survival benefits, throughout the policy term.
When it comes to securing your financial future, understanding the nuances between different insurance plans is crucial. Term insurance plans and money back policies are two popular options, each offering distinct benefits.
As a buyer you might get confused between term insurance vs money back policy. Since both the plans offer benefits of insurance, it will take more research to make a decision. Let us move forward and understand term insurance vs money back policy to decide which plan can help you strengthen your future.
Ultimately, the better choice between term plan and a money back policy depends on your priorities. If your primary goal is to secure financial protection for your loved ones at an affordable cost, a term plan may be the better option. However, if you value both insurance coverage and periodic returns, along with liquidity and savings, a money back policy might be more suitable. Consider your financial objectives, risk tolerance, and long-term plans before making a decision. Consulting with a financial advisor can also help you determine the most appropriate choice based on your specific circumstances.
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. Let us understand the term plan vs money back policy:
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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A term insurance plan is a type of life insurance policy that provides coverage for a specified period, known as the term. During this term, if the insured person passes away, the policy pays out a predetermined sum of money, known as the death benefit, to the designated beneficiary. Unlike other types of life insurance policies, such as whole life or universal life insurance, term insurance does not accumulate cash value over time. It is designed to provide pure financial protection for the beneficiaries in the event of the insured’s death during the term of the policy.
Buying a term insurance plan offers a cost-effective way to ensure financial security for your loved ones. Let us take a closer look at some of the advantages of buying a term plan:
A term insurance plan provides financial security for your loved ones in the event of your untimely demise. The death benefit ensures that your family members are financially supported and can maintain their standard of living, pay off debts, cover expenses like mortgage or education costs, and meet other financial obligations.
Term insurance plans typically offer high coverage amounts at relatively low premiums compared to other types of life insurance policies. This affordability makes it easier for individuals to obtain sufficient coverage to protect their families without straining their budget.
Term insurance plans offer flexibility in terms of policy duration and coverage options. Policyholders can choose the term length that aligns with their financial goals and family needs. Additionally, they can opt for additional riders or benefits to enhance their coverage, such as accidental death benefit, critical illness rider, or waiver of premium rider.
Knowing that your loved ones will be financially secure in your absence provides peace of mind. Term insurance gives you the assurance that your family’s financial future is protected, regardless of what life may bring.
Premiums paid towards a term insurance plan are eligible for tax deductions under Section 80C of the Income Tax Act, up to a specified limit. Additionally, the death benefit received by the nominee is usually tax-free under Section 10(10D) of the Income Tax Act, making term insurance an efficient tax-saving tool.
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A money back policy is a type of life insurance plan that combines elements of insurance and savings. Under this policy, the insured person receives periodic payouts, known as survival benefits, at specific intervals during the policy term. These intervals typically coincide with a percentage of the total sum assured. Unlike traditional life insurance policies where the benefit is paid out only upon death or maturity, a money back policy provides liquidity by returning a portion of the sum assured at regular intervals, even if the insured survives the policy term.
In the case of the insured’s death during the policy term, the full sum assured is paid out to the nominee, minus any survival benefits already received. This type of policy provides both financial protection and a form of savings or investment, making it popular among individuals seeking a combination of insurance coverage and periodic returns.
Buying a money back policy provides a combination of insurance coverage, periodic returns, savings, and tax benefits. Let us take a closer look at some of the benefits:
One of the primary benefits of a money back policy is the regular payouts or survival benefits provided to the policyholder at specified intervals during the policy term. These payouts offer a source of liquidity and can be used to meet various financial needs or goals.
Similar to traditional life insurance policies, a money back policy provides a death benefit to the nominee in the event of the insured’s demise during the policy term. This ensures that the nominee receives a lump sum amount to cover financial obligations and maintain their standard of living.
Money back policies serve as a form of forced savings or investment, as a portion of the premium paid accumulates over time and is returned to the policyholder in the form of survival benefits. This can help individuals build a corpus for future expenses or emergencies.
Money back policies often offer flexibility in terms of premium payment frequency, policy term, and coverage options. Policyholders can choose the policy duration and premium amount that best suits their financial situation and goals.
Premiums paid towards a money back policy may be eligible for tax deductions under Section 80C of the Income Tax Act, providing tax savings for the policyholder. Additionally, the maturity amount and death benefit received are usually tax-free under Section 10(10D) of the Income Tax Act, subject to certain conditions.
Term plans with money back combine the benefits of life insurance with guaranteed returns, providing financial security for your family in case of an untimely event and assured payouts if you outlive the policy term. With term plans with money back, you safeguard your family’s future, avail tax advantages, and retain liquidity as an option. Some of the advantages of term insurance with money back plans:
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.
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.
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.
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 unfavorable 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.
1
Term insurance provides a lump sum benefit upon the death of the insured within the policy term, while a money-back policy returns a portion of the sum assured at regular intervals during the policy term.
2
Money-back term life insurance is a type of policy that offers periodic payouts during the policy term, providing financial support at intervals, in addition to the death benefit.
3
Term insurance plans typically do not offer maturity benefits. They solely provide a death benefit to the nominee if the insured passes away during the policy term.
4
No, term insurance does not provide money back during the policy term. It only pays out the death benefit if the insured dies within the term of the policy.
5
The money received through a money-back policy in term life insurance is generally not taxable as it is considered a return of premium and not income.
6
Cancellation policies vary among insurance providers, but typically, if you cancel your policy, you may receive a refund of premiums paid, excluding any fees or deductions.
7
The choice between term insurance and money-back term insurance depends on individual needs. Term insurance offers higher coverage at a lower premium, while money-back policies provide periodic payouts during the policy term.
8
Disadvantages of money back policies include higher premiums compared to term insurance, lower overall returns compared to other investment options, and potential complexities in understanding the policy terms and conditions.
9
Money-back policies may not be the most efficient investment option due to their lower returns compared to other investment avenues. They are primarily insurance products with a savings component rather than pure investment vehicles.
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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.
