Differences Between Money Back Plans and Term Insurance Plans
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Money-back plans are life insurance and investment plans in which the life guaranteed receives a portion of the total value at regular intervals rather than a single payment at the end of the term. These plans are best suited for people who wish to save money through insurance while also maintaining liquidity throughout.
Term plans, on the other hand, are pure protection plans that offer cash coverage to the life assured and his family in the event of an unexpected occurrence. When a term insurance policy is purchased, the life assured receives the life coverage or the amount promised if the life assured dies while the policy is still valid.
Benefits of Buying Money Back Plan
Here are some of the advantages of purchasing a money-back plan:
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Provides Survival Advantages
A money-back plan pays out a portion of the cash promised at regular intervals to the life assured. These payments are referred to as survival benefits. In addition to the normal sum, these plans give the life insured maturity benefits as well as a bonus (if applicable) at the time of plan maturity.
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Provides Insurance Protection
A money-back plan, although viewed as an excellent financial tool, is also an insurance device. You can select appropriate insurance that can be utilised to satisfy the financial needs of your loved ones while you are away. Such arrangements provide dependability and allow your family members to live a dignified life even when you are not around.
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Return on Investment with No Risk
Money-back guarantees are great for people who do not want any risk in their return policy. Because there is no danger in these plans, one may freely choose money return options.
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Tax Advantages
The premiums paid under this plan are tax-deductible under Section 80C of the Internal Revenue Code of 1961. However, the premium must be less than 10% of the policy's total assured. Section 10 (10D) of the Income Tax Act of 1961 provides that the sum assured payable under the scheme is tax-free.
Benefits of Purchasing Term Insurance
The following are the advantages of obtaining a term insurance policy:
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Life Insurance
In the event of the life assured's untimely death, the family receives a lump sum payment called the death benefit to help them stay financially stable. The family can select whether they want the payout in the form of a lump sum or an income that is paid out annually or monthly.
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Reasonably Priced Premiums
Term plans provide high-value life insurance coverage for a modest cost. Depending on the policyholder, premiums might be paid annually, semi-annually, or monthly. The earlier someone purchases a term plan, the cheaper the cost.
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Coverage for Critical Illnesses
In the event that severe sickness coverage is included in the buy one get one free offer, he or she is guaranteed to receive a lump sum payment during the treatment of a critical illness under most term plans, either by default or through a rider option. This makes it more appealing for the buyer to buy it.
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Tax Advantages
Tax advantages are available for premiums paid under Section 80C as well as premiums paid for critical sickness benefits under Section 80D of the IT Act. Section 10 exempts nominees from paying taxes on the lump-sum amount received as the sum assured/death benefit (10D).
Conclusion
When you buy a term insurance policy, you get death benefits, maturity benefits, and optional death and disability benefits. A money-back plan assists one in meeting the requirement of a consistent flow of money over a period of time. Term insurance is the ideal option for those seeking more coverage at a lower cost.
Money back policy, on the other hand, is the greatest option for those who have met their protection needs and now have enough money to save and invest for reaching their short-term life objectives through regular survivor benefit pay-outs. Both are advantageous in their own right. As a result, based on your requirements, it is essential to pick what is best for you and the welfare of your loved ones in your absence.
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