Comparison Of Money Back Plans With Traditional Life Insurance Plans

Money back plans are life insurance and investment plans in which the life guaranteed receives a portion of the total money at regular intervals rather than a single payment at the end of the term. These plans are best suited for people who desire to save money through insurance while also maintaining liquidity throughout. Life insurance policies, on the other hand, are pure protection plans that give cash coverage to the life assured and his family in the event of an unexpected incident. When a life insurance policy is purchased, the life assured receives the life coverage or the amount promised in the event that the life assured dies while the policy is still valid. The advantages of both money return plans and life insurance policies are briefly reviewed.

Money BackPlans vs. Term Life Insurance Plans

You must first understand the differences between the two types of insurance coverage in order to make an informed decision.

• Coverage

The term plan is a form of life insurance that provides comprehensive coverage at a low cost. A Money Back insurance policy, on the other hand, guarantees a lower sum for the same premium amount. In the case of the insured's death, a term plan will pay a lump amount to protect the financial stability of the insured's family members, whereas a money return plan will pay the sum pledged plus any collected bonus.

• Return on Investment

If you outlive the policy term under a term plan, the insurance company will not pay any survival benefits. The Money Back plan, on the other hand, will pay out a portion of the sum insured at regular intervals during the policy duration.

• Plan Benefits

Benefits such as death benefit, maturity benefit, and survival benefit are provided under the Money Return Plan. Term insurance, on the other hand, is a type of insurance that provides a death benefit. A maturity benefit is included in some term insurance plans. A lump-sum payment is made at regular intervals under the Money Back Policy. The death benefit from term insurance might be paid in one lump sum or in monthly installments.

• Tax Advantages

Both insurance programs provide tax advantages. Payments for term life insurance premiums and Money Back Section 80C of the Income Tax Act of 1961 exempt Money Back schemes from taxation. The maximum exemption amount is INR 1.5 lakh. The maturity, death, and survivor benefits are all tax-free.

• Bonus

Money Back Plans are frequent participation plans, which allow for the claim of an insurance benefit. Term insurance plans are non-participating, which means they do not include any incentives.

Conclusion

When deciding between the two, you must consider your personal aspirations as well as your financial needs. A term insurance policy is a protection policy with no investment component. It will provide financial security for your loved ones in the event that something unfortunate happens to you. However, if you want to see a return on your investment, you should choose a Money Back life insurance policy. In addition to providing insurance, it also serves as an investment vehicle. Those who have previously satisfied their protection needs and have extra funds might use money back plans to accomplish their long-term financial objectives. When making a selection, keep the goal of the investment in mind.

Also read: 

Are Money Back Policies Really Effective?

Common Exclusions in Money Back Plans

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.