Exploring The Difference Between Endowment Policy And Money-back Plan

Are you undecided about which insurance policy to purchase? This essay will help you make a clear decision between an endowment and a money-back plan. Because of the number of goods offered on the market by insurance firms, choosing the correct insurance coverage is usually a difficult undertaking. Mis Selling of items by middlemen adds to the confusion surrounding some products.

Policyholders want a plan that provides life insurance and also serves as a savings vehicle. However, choosing between a variety of insurance policies is a time-consuming process. To donate to such schemes, there is an endowment plan and a money-back plan. Nonetheless, there are a number of parallels and contrasts between the two. Depending on one's preferences, any of the plants can be chosen. Here are a few examples of how the two plans compare. 

Whereas, those who wish to secure their life while also investing in such a way that they receive a fixed sum at regular intervals should choose the Money-Back Plan. This plan is useful for making a short-term investment, such as enrolling your child in college for a specific course. The amount of money received at regular intervals motivates the policyholder to organize little family activities and helps him develop in life by providing consistent income. Individuals who have such policies might choose the Money-Back Plan.

Difference Between Endowment Policy And Money-back Plan

Let's take a look at few differences between Endowment Policy and Money-back Plan:

1. Benefits Receipt Term

If the insurance bearer survives the term, the agreed sum is assured and any relevant bonuses are paid at the policy's maturity. The policyholder receives a portion of the sum promised at regular intervals, with the remaining sum assured and any relevant bonuses paid at the policy's maturity at the end of the term.

2. Death Benefit

If the policyholder dies within the policy's term, both plans pay the sum assured plus any relevant incentives.

3. Who Should Buy

If the policyholder dies within the policy's term, both plans pay the sum assured plus any relevant incentives. A money-back plan is suitable for you if you need a steady stream of revenue to accomplish short-term financial goals.

4. Benefits Of Term And Maturity

If the life assured individual outlives the insurance term in an endowment plan, the amount guaranteed and corresponding awards are provided to them at maturity. There are no provisions for payments under the endowment plan.

In contrast, a money-back policy pays out a percentage of the sum assured at predetermined intervals over the policy period. In addition, if the policyholder lives longer than the policy term, the guaranteed person will receive the balance of the policy at maturity.

5. Benefits Of Mortality

The endowment policy and the money-back plan will pay the guaranteed amount plus suitable bonuses if the assured individual leaves within the policy's term. In a money-back plan, however, regardless of the premium installments paid, the entire sum assured is paid to the life-assured person's dependents in the case of the policyholder's death.

This is the feature that distinguishes an endowment from a money-back plan, and it's also why a money-back plan costs a little more.

6. Suitability

An endowment plan is a way for people to save money for all of their long-term financial goals, such as buying a house, paying for their children's higher education, or retiring.

Money-back insurance, on the other hand, is great for people who need a steady source of income to achieve all of their short-term financial goals, such as paying EMIs, home expenses, and children's school tuition.

7. Uncertainty

The risk associated with endowment schemes is relatively low when compared to a money-back policy. Furthermore, the survival and mortality benefits of an endowment plan are higher, and the premium installment is lesser.

Conclusion

As we can see from the example above, investing in a money-back policy provides steady returns throughout the policy period, allowing you to achieve your short-term objectives. An endowment plan, on the other hand, allows you to save a substantial sum of money that you can enjoy when the policy matures.

Before choosing an endowment or money-back plan, it's a good idea to think about your financial goals and then pick a plan that fits them. Before deciding on a plan, compare the policy's advantages and riders. Finally, both approaches are good; it all relies on what your investment aim is and how successful your investment will be.

Also read - Is Purchasing An Endowment Policy Beneficial?