Difference between Money Back Life Insurance and Term Life Insurance

Before making an investment, one has to be aware of different types of insurance plans. The two major insurance tools are term life insurance and money back life insurance which can help your family stay secure even in your absence by delivering good returns. To avoid any confusion between term insurance and moneyback insurance, let’s dig into some of their differences to help you make wise investment decisions. 

What Is Term Life Insurance?

A term insurance policy is life insurance that gives financial security to your loved ones or family in a situation if any unfortunate incident happens during the policy term. The policy is available at an affordable premium and the amount of sum assured is given to the family. This insurance policy is designed to insure the risk of death, but, if you survive the policy term, you will not be entitled to get any maturity benefit.

What Is a Money Back Life Insurance Plan?

A money back life insurance provides you with life insurance coverage for a certain period. This insurance policy will offer you returns at regular intervals during the insurance policy term, which are known as survival benefits. If anything unfortunate happens with the policyholder before the maturity period, the nominee will become entitled to get the sum assured irrespective of the survival benefits which were given to you earlier.

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Difference Between Term Life Insurance and Money Back Life Insurance

Here are some basic differences between the term and money back life insurance plans. Going through the below-given information can help you make well-informed decisions related to insurance purchase:

• Policy Coverage

The term insurance policy is a life cover that gives high coverage at a low premium. On the contrary, a money-back insurance plan holds a low sum assured by charging the same premium. In a situation of policyholder’s demise, the term insurance pays the claim amount in a lump sum to the family members whereas the moneyback insurance pays the sum assured with accrued bonus.

• Return on Investment

In a term insurance policy, the insurance firm is not liable to offer any sort of survival benefits if the policyholder survives the policy tenure. However, the money-back insurance policy will provide a specific percentage of the sum assured at certain time intervals during the policy term.

• Tax Benefit

Both these insurance policies provide tax benefits. The premium amounts paid for term life insurance and money back insurance plans are exempted from the tax under section 80C of the Income Tax Act. The amount of tax exemption is limited to Rs. 1.5 Lakh under both plans. Also, no tax is to be payable on the amount of death benefit, maturity benefit or survival benefit. 

To Conclude

Both moneyback and term life insurance are useful instruments. One should invest in them based on personal goals and financial needs. But, before making a selection, one should own a clear understanding of both insurance plans. Term insurance is a protection plan but it has no scope for investment, while moneyback insurance gives returns on the plan in addition to providing an insurance cover. We hope the aforementioned points will help you pick the right plan for you.

Also Read: 

Can I Get My Insurance Premium Back Under A Money Back Plan?

How Can I Compare Money Back Policies Online In India?

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.